Self-Regulatory Organizations; New York Stock Exchange LLC; Order Approving Proposed Rule Change To Establish Fees for NYSE Trades, 13293-13295 [E9-6722]
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Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices
thereunder because it updates NSCC’s
fee schedule. As such, it provides for
the equitable allocation of fees among
its participants.
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
NSCC does not believe that the
proposed rule change will have any
impact or impose any burden on
competition.
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments relating to the
proposed rule change have not yet been
solicited or received. NSCC will notify
the Commission of any written
comments received by NSCC.
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 6 and Rule 19b–
4(f)(2) 7 promulgated thereunder
because the proposal changes a due, fee,
or other charge applicable only to a
member. At any time within sixty 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 proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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, 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 NSCC. 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–NSCC–2009–02 and should
be submitted on or before April 16,
2009.
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.8
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–6721 Filed 3–25–09; 8:45 am]
BILLING CODE 8010–01–P
SECURITIES AND EXCHANGE
COMMISSION
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
Number SR–NSCC–2009–02 on the
subject line.
[Release No. 34–59606; File No. SR–NYSE–
2009–04]
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
Number SR–NSCC–2009–02. This file
I. Introduction
On January 27, 2009, the New York
Stock Exchange LLC (‘‘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
6 15
7 17
20:28 Mar 25, 2009
March 19, 2009.
8 17
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
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13293
thereunder,2 a proposed rule change to
introduce its NYSE Trades service, a
new NYSE-only market data service that
allows a vendor to redistribute on a realtime basis the same last sale information
that NYSE reports to the Consolidated
Tape Association (‘‘CTA’’) for inclusion
in the CTA’s consolidated data stream
and certain other related data elements
(‘‘NYSE Last Sale Information’’), and to
establish fees for that service. The
proposed rule change was published for
comment in the Federal Register on
February 4, 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 introduce
NYSE Trades, a new service pursuant to
which it will allow vendors, brokerdealers, and others (‘‘NYSE-Only
Vendors’’) to make available NYSE Last
Sale Information on a real-time basis.
NYSE Last Sale Information would
include last sale information for all
securities that are traded on the
Exchange. The Exchange will make
NYSE Last Sale Information available
through its new NYSE Trades service at
the same time as it provides last sale
information to the processor under the
CTA Plan. In addition to the
information that the Exchange provides
to CTA, NYSE Last Sale Information
will also include a unique sequence
number that the Exchange assigns to
each trade and that allows an investor
to track the context of the trade through
other Exchange market data products,
such as NYSE OpenBook® and NYSE
Info Tools®.
The Exchange proposes to charge
$1500 per month for the receipt of
access to all of the datafeeds of NYSE
Last Sale Information that the Exchange
will make available.4 In addition, the
Exchange proposes to charge each
subscriber to an NYSE-Only Vendor’s
NYSE Trades service $15 per month per
display device for the receipt and use of
NYSE Last Sale Information.5
NYSE represents that no investors or
broker-dealers are required to subscribe
to the product, as they can find the same
NYSE last sale prices either in the
2 17
CFR 240.19b–4.
Securities Exchange Act Release No. 59309
(January 28, 2009), 74 FR 5955 (February 4, 2009).
4 Currently, the Exchange trades only Network A
securities. The Exchange does not propose to
impose any program classification charges for the
use of NYSE Trades.
5 The Exchange proposes to use the revised unit
of count methodology to determine the device fees
payable by data recipients applicable to NYSE
OpenBook® products. See Securities Exchange Act
Release No. 59544 (March 9, 2009), 74 FR 11162
(March 16, 2009) (SR–NYSE–2008–131).
3 See
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Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices
Exchange’s NYSE Realtime Reference
Prices service,6 or integrated with the
prices that other markets make available
under the CTA Plan. NYSE anticipates
that, even though NYSE Trades’ Last
Sale Information provides a less
expensive alternative to the
consolidated price information that
investors and broker-dealers receive
from CTA, the information that NYSE
contributes to the CTA consolidated
datafeed and the low latency of the CTA
datafeed will continue to satisfy the
needs of the vast majority of individual
and professional investors. The
Exchange developed NYSE Trades
primarily at the request of traders who
are very latency sensitive and
anticipates that demand for the product
will derive primarily from investors and
broker-dealers who desire to use NYSE
Trades to power certain trading
algorithms or smart order routers.7
The Exchange will require NYSEOnly Vendors to enter into the form of
‘‘vendor’’ agreement into which the
CTA Plan requires recipients of the
Network A last sale prices information
datafeeds to enter (the ‘‘Network A
Vendor Form’’). The Network A Vendor
Form will authorize the NYSE-Only
Vendor to provide the NYSE Trades
service to its subscribers and customers.
The Network A Participants drafted the
Network A Vendor Form, it is
sufficiently generic to accommodate
NYSE Trades, and it has been in use in
substantially the same form since 1990.8
The Exchange will require professional
and non-professional subscribers to
NYSE Trades to undertake to comply
with the same contract, reporting,
payment, and other administrative
requirements as to which the Network A
Participants subject them in respect of
Network A last sale information under
the CTA Plan.
III. Discussion
The Commission 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.9 In particular, it is consistent
6 See Securities Exchange Act Release No. 57966
(June 16, 2008), 73 FR 35182 (June 20, 2008) (SR–
NYSE–2007–04).
7 The latency difference between accessing last
sales through the NYSE datafeed or through the
CTA datafeed can be measured in tens of
milliseconds.
8 See Securities Exchange Act Release Nos. 28407
(September 6, 1990), 55 FR 37276 (September 10,
1990); and 49185 (February 4, 2004), 69 FR 6704
(February 11, 2004).
9 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
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20:28 Mar 25, 2009
Jkt 217001
with Section 6(b)(4) of the Act,10 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,11 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,12 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,13 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.14
The Commission has reviewed the
proposal using the approach set forth in
the NYSE Arca Order for non-core
market data fees.15 In the NYSE Arca
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.’’ 16 It noted that the
‘‘existence of significant competition
provides a substantial basis for finding
10 15
U.S.C. 78f(b)(4).
U.S.C. 78f(b)(5).
12 15 U.S.C. 78f(b)(6).
13 17 CFR 242.603(a).
14 NYSE is an exclusive processor of NYSE Trades
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.
15 See 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 the competitive factors that apply to noncore market data products. The Commission hereby
incorporates by reference the data and analysis from
the NYSE Arca Order into this order.
16 Id. at 74771.
11 15
PO 00000
Frm 00122
Fmt 4703
Sfmt 4703
that the terms of an exchange’s fee
proposal are equitable, fair, reasonable,
and not unreasonably or unfairly
discriminatory.’’ 17 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.’’ 18
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. 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.19 In
contrast, individual exchanges and
other market participants distribute
non-core data voluntarily. The
mandatory nature of the core data
disclosure regime leaves little room for
competitive forces to determine
products and fees. Non-core data
products and their fees are, by contrast,
much more sensitive to competitive
forces. 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.
In the NYSE Arca Order, the
Commission discussed two broad types
of competitive forces that generally
apply to exchanges in their distribution
of a non-core data product—the need to
attract order flow and the availability of
data alternatives. These forces also
applied to NYSE in setting the terms of
this proposal for the NYSE Trades data
product: (i) NYSE’s compelling need to
attract order flow from market
participants; and (ii) the availability to
17 Id.
at 74782.
at 74781.
19 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.’’).
18 Id.
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Federal Register / Vol. 74, No. 57 / Thursday, March 26, 2009 / Notices
market participants of alternatives to
purchasing NYSE’s data.
Table 1 below provides a 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
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
NYSElisted
20.5
26.2
15.7
26.2
9.0
1.4
0.7
0.4
0.0
0.0
0.0
NASDAQlisted
39.9
31.0
15.8
0.0
10.8
1.4
0.7
0.3
0.1
0.0
0.0
that the proposal does not unreasonably
discriminate among types of users.
The market share percentages in Table
1 strongly indicate that NYSE must
compete vigorously for order flow to
maintain its share of trading volume.
The need to attract order flow imposes
significant pressure on 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.
Moreover, distributing data widely
among investors, and thereby promoting
familiarity with the exchange and its
services, is an important exchange
strategy for attracting order flow.21
In addition to the need to attract order
flow, the availability of alternatives to
NYSE Trades significantly affect the
terms on which NYSE can distribute
this market data.22 In setting the fees for
its NYSE Trades, the Exchange must
consider the extent to which market
participants would choose one or more
alternatives instead of purchasing the
Exchange’s data.23 Of course, the most
basic source of information generally
available at an exchange is the complete
record of an exchange’s transactions that
is provided in the core data feeds.24 In
this respect, the core data feeds that
include an exchange’s own transaction
information are a significant alternative
to the exchange’s market data product.25
The various self-regulatory
organizations, the several Trade
Reporting Facilities of FINRA, and ECNs
that produce proprietary data, as well as
the core data feed, are all sources of
competition in non-core data products.
As Table 1 illustrates, share volume in
U.S.-listed equities is widely dispersed
among trading venues, and these venues
are able to offer competitive data
products as alternatives to NYSE
Trades. 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.
Because 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.
No comments were submitted on this
proposal, and the Commission notes
SUMMARY: This is an amendment of the
Administrative declaration of disaster
for the State of Texas dated 03/10/2009.
Incident: Bastrop County Wildland
Fire.
Incident Period: 02/28/2009 through
03/13/2009.
Effective Date: 03/17/2009.
Physical Loan Application Deadline
Date: 5/11/2009.
Economic Injury (EIDL) Loan
Application Deadline Date: 12/10/2009.
20 Source: ArcaVision (available at
www.arcavision.com).
21 See NYSE Arca Order at 74784 nn. 218–219
and accompanying text (noting exchange strategy of
offering data for free as a means to gain visibility
in the market place).
22 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).
23 See NYSE Arca Order at 74783.
24 Id.
25 Id.
26 15 U.S.C. 78s(b)(2).
27 17 CFR 200.30–3(a)(12).
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IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,26 that the
proposed rule change (SR–NYSE–2009–
04), be, and it hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.27
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9–6722 Filed 3–25–09; 8:45 am]
BILLING CODE 8010–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration # 11690 and # 11691]
Texas Disaster # TX–00334
Small Business Administration.
Amendment 1.
AGENCY:
ACTION:
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[Federal Register Volume 74, Number 57 (Thursday, March 26, 2009)]
[Notices]
[Pages 13293-13295]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: E9-6722]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-59606; File No. SR-NYSE-2009-04]
Self-Regulatory Organizations; New York Stock Exchange LLC; Order
Approving Proposed Rule Change To Establish Fees for NYSE Trades
March 19, 2009.
I. Introduction
On January 27, 2009, the New York Stock Exchange LLC (``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 introduce its NYSE Trades service, a new NYSE-
only market data service that allows a vendor to redistribute on a
real-time basis the same last sale information that NYSE reports to the
Consolidated Tape Association (``CTA'') for inclusion in the CTA's
consolidated data stream and certain other related data elements
(``NYSE Last Sale Information''), and to establish fees for that
service. The proposed rule change was published for comment in the
Federal Register on February 4, 2009.\3\ The Commission received no
comment letters on the proposal. This order approves the proposed rule
change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ See Securities Exchange Act Release No. 59309 (January 28,
2009), 74 FR 5955 (February 4, 2009).
---------------------------------------------------------------------------
II. Description of the Proposal
The Exchange proposes to introduce NYSE Trades, a new service
pursuant to which it will allow vendors, broker-dealers, and others
(``NYSE-Only Vendors'') to make available NYSE Last Sale Information on
a real-time basis. NYSE Last Sale Information would include last sale
information for all securities that are traded on the Exchange. The
Exchange will make NYSE Last Sale Information available through its new
NYSE Trades service at the same time as it provides last sale
information to the processor under the CTA Plan. In addition to the
information that the Exchange provides to CTA, NYSE Last Sale
Information will also include a unique sequence number that the
Exchange assigns to each trade and that allows an investor to track the
context of the trade through other Exchange market data products, such
as NYSE OpenBook[supreg] and NYSE Info Tools[supreg].
The Exchange proposes to charge $1500 per month for the receipt of
access to all of the datafeeds of NYSE Last Sale Information that the
Exchange will make available.\4\ In addition, the Exchange proposes to
charge each subscriber to an NYSE-Only Vendor's NYSE Trades service $15
per month per display device for the receipt and use of NYSE Last Sale
Information.\5\
---------------------------------------------------------------------------
\4\ Currently, the Exchange trades only Network A securities.
The Exchange does not propose to impose any program classification
charges for the use of NYSE Trades.
\5\ The Exchange proposes to use the revised unit of count
methodology to determine the device fees payable by data recipients
applicable to NYSE OpenBook[supreg] products. See Securities
Exchange Act Release No. 59544 (March 9, 2009), 74 FR 11162 (March
16, 2009) (SR-NYSE-2008-131).
---------------------------------------------------------------------------
NYSE represents that no investors or broker-dealers are required to
subscribe to the product, as they can find the same NYSE last sale
prices either in the
[[Page 13294]]
Exchange's NYSE Realtime Reference Prices service,\6\ or integrated
with the prices that other markets make available under the CTA Plan.
NYSE anticipates that, even though NYSE Trades' Last Sale Information
provides a less expensive alternative to the consolidated price
information that investors and broker-dealers receive from CTA, the
information that NYSE contributes to the CTA consolidated datafeed and
the low latency of the CTA datafeed will continue to satisfy the needs
of the vast majority of individual and professional investors. The
Exchange developed NYSE Trades primarily at the request of traders who
are very latency sensitive and anticipates that demand for the product
will derive primarily from investors and broker-dealers who desire to
use NYSE Trades to power certain trading algorithms or smart order
routers.\7\
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 57966 (June 16,
2008), 73 FR 35182 (June 20, 2008) (SR-NYSE-2007-04).
\7\ The latency difference between accessing last sales through
the NYSE datafeed or through the CTA datafeed can be measured in
tens of milliseconds.
---------------------------------------------------------------------------
The Exchange will require NYSE-Only Vendors to enter into the form
of ``vendor'' agreement into which the CTA Plan requires recipients of
the Network A last sale prices information datafeeds to enter (the
``Network A Vendor Form''). The Network A Vendor Form will authorize
the NYSE-Only Vendor to provide the NYSE Trades service to its
subscribers and customers. The Network A Participants drafted the
Network A Vendor Form, it is sufficiently generic to accommodate NYSE
Trades, and it has been in use in substantially the same form since
1990.\8\ The Exchange will require professional and non-professional
subscribers to NYSE Trades to undertake to comply with the same
contract, reporting, payment, and other administrative requirements as
to which the Network A Participants subject them in respect of Network
A last sale information under the CTA Plan.
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release Nos. 28407 (September 6,
1990), 55 FR 37276 (September 10, 1990); and 49185 (February 4,
2004), 69 FR 6704 (February 11, 2004).
---------------------------------------------------------------------------
III. Discussion
The Commission 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.\9\ In
particular, it is consistent with Section 6(b)(4) of the Act,\10\ 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,\11\ 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.
---------------------------------------------------------------------------
\9\ In approving this proposed rule change, the Commission has
considered the proposed rule's impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
\10\ 15 U.S.C. 78f(b)(4).
\11\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Commission also finds that the proposed rule change is
consistent with the provisions of Section 6(b)(8) of the Act,\12\ 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,\13\ 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.\14\
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\12\ 15 U.S.C. 78f(b)(6).
\13\ 17 CFR 242.603(a).
\14\ NYSE is an exclusive processor of NYSE Trades 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.\15\ In the
NYSE Arca 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.''
\16\ 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.'' \17\ 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.'' \18\
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\15\ See 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 the
competitive factors that apply to non-core market data products. The
Commission hereby incorporates by reference the data and analysis
from the NYSE Arca Order into this order.
\16\ Id. at 74771.
\17\ Id. at 74782.
\18\ 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. 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.\19\ In
contrast, individual exchanges and other market participants distribute
non-core data voluntarily. The mandatory nature of the core data
disclosure regime leaves little room for competitive forces to
determine products and fees. Non-core data products and their fees are,
by contrast, much more sensitive to competitive forces. 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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\19\ 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.'').
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In the NYSE Arca Order, the Commission discussed two broad types of
competitive forces that generally apply to exchanges in their
distribution of a non-core data product--the need to attract order flow
and the availability of data alternatives. These forces also applied to
NYSE in setting the terms of this proposal for the NYSE Trades data
product: (i) NYSE's compelling need to attract order flow from market
participants; and (ii) the availability to
[[Page 13295]]
market participants of alternatives to purchasing NYSE's data.
Table 1 below provides a 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 www.arcavision.com).
Table 1--Reported Share Volume in U.S.-Listed Equities During January
2009 (%)
------------------------------------------------------------------------
All NYSE- NASDAQ-
Trading venue stocks listed listed
------------------------------------------------------------------------
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. The need to attract order flow imposes significant pressure on
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.
Moreover, distributing data widely among investors, and thereby
promoting familiarity with the exchange and its services, is an
important exchange strategy for attracting order flow.\21\
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\21\ See NYSE Arca Order at 74784 nn. 218-219 and accompanying
text (noting exchange strategy of offering data for free as a means
to gain visibility in the market place).
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In addition to the need to attract order flow, the availability of
alternatives to NYSE Trades significantly affect the terms on which
NYSE can distribute this market data.\22\ In setting the fees for its
NYSE Trades, the Exchange must consider the extent to which market
participants would choose one or more alternatives instead of
purchasing the Exchange's data.\23\ Of course, the most basic source of
information generally available at an exchange is the complete record
of an exchange's transactions that is provided in the core data
feeds.\24\ In this respect, the core data feeds that include an
exchange's own transaction information are a significant alternative to
the exchange's market data product.\25\
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\22\ 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).
\23\ See NYSE Arca Order at 74783.
\24\ Id.
\25\ Id.
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The various self-regulatory organizations, the several Trade
Reporting Facilities of FINRA, and ECNs that produce proprietary data,
as well as the core data feed, are all sources of competition in non-
core data products. As Table 1 illustrates, share volume in U.S.-listed
equities is widely dispersed among trading venues, and these venues are
able to offer competitive data products as alternatives to NYSE Trades.
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.
Because 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. No comments were submitted on this proposal, and
the Commission notes that the proposal does not unreasonably
discriminate among types of users.
IV. Conclusion
It is therefore ordered, pursuant to Section 19(b)(2) of the
Act,\26\ that the proposed rule change (SR-NYSE-2009-04), be, and it
hereby is, approved.
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\26\ 15 U.S.C. 78s(b)(2).
\27\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\27\
Florence E. Harmon,
Deputy Secretary.
[FR Doc. E9-6722 Filed 3-25-09; 8:45 am]
BILLING CODE 8010-01-P
