Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish Certain Fees for the NYSE Trades and NYSE Realtime Reference Prices Market Data Products, 21464-21469 [2013-08324]
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Federal Register / Vol. 78, No. 69 / Wednesday, April 10, 2013 / Notices
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commenter acknowledge,71 which may
have a detrimental impact on certain
Members and possibly competition
overall. However, the Commission
believes NSCC has taken adequate steps
to engage Members impacted by the
increase and mitigate the effect of the
increase, as demonstrated by the impact
studies and the working group that
NSCC convened that resulted in the 18month implementation scheduled.72
Additionally, the Commission believes
that while there could be a
redistribution of business for agency
broker-dealers,73 agency broker-dealers
impacted by the Proposed Rule Change
could seek alternative arrangements,
such as moving the applicable portion
of the impacted business to or through
a continuing Member, as NSCC suggests
and as is currently done by some
firms.74 The Commission also
acknowledges that while the proposal
may have an effect on customers, a more
accurate reflection of risks in the
calculation of Clearing Fund margin,
however, could benefit customers
through reducing risks to NSCC.
NSCC has not proposed the CCP
Alternative discussed above as a
proposed rule change, and thus the CCP
Alternative is outside the scope of this
Proposed Rule Change. Nonetheless, in
considering the consistency of the
Proposed Rule Change with the
requirements of the Act and the
applicable rules and regulations
thereunder, the Commission
acknowledges that the CCP Alternative
does not appear practical for NSCC at
the current time because, as NSCC has
pointed out, the institutional
counterparties to ID trades are not NSCC
members, and thus, absent new
membership for these counterparties,
NSCC would have to voluntarily
guarantee uncollateralized ID trades
without collecting margin to insulate
NSCC from a default of a counterparty,
which would not resolve the market risk
that ID Offsets present and NSCC seeks
to eliminate through the Proposed Rule
Change. Furthermore, even if the CCP
Alternative did resolve the market risk
that the Proposed Rule Change is
intended to address, the CCP
Alternative does not appear to be an
immediately viable option for NSCC, as
it would likely require potentially
71 See First Lek Letter, supra note 5, and see
NSCC Responses, supra note 6.
72 See NSCC Responses, supra note 6.
73 See Lek Letters, supra note 5.
74 See First NSCC response, supra note 6. The
Commission notes that it did not receive comments
from any other firms potentially impacted by the
Proposed Rule Change.
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complicated changes to the current
clearance and settlement structure.75
V. Conclusion
On the basis of the foregoing, the
Commission finds the Proposed Rule
Change consistent with the
requirements of the Act, particularly
with the requirements of Section 17A of
the Act,76 and the rules and regulations
thereunder.
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,77 that the
proposed rule change SR–NSCC–2012–
10 be and hereby is APPROVED as of
the date of this order or the date of the
‘‘Notice of Filing No Objection to
Advance Notice Filing to Eliminate the
Offset of [NSCC’s] Obligations with
Institutional Delivery Transactions that
Settle at The Depository Trust Company
for the Purpose of Calculating Its
Clearing Fund Under Procedure XV of
Its Rules & Procedures’’ (File No. SR–
NSCC–2012–810),78 whichever is later.
For the Commission by the Division of
Trading and Markets, pursuant to delegated
authority.79
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–08307 Filed 4–9–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69298; File No. SR–NYSE–
2013–24]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Establish
Certain Fees for the NYSE Trades and
NYSE Realtime Reference Prices
Market Data Products
April 4, 2013.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on March
21, 2013, New York Stock Exchange
LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
75 See
Second NSCC Response, supra note 6.
U.S.C. 78q–1.
77 15 U.S.C. 78s(b)(2).
78 Release No. 34–69301
79 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
76 15
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Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to establish
certain fees for the NYSE Trades and
NYSE Realtime Reference Prices
(‘‘NYSE RRP’’) market data products.
The text of the proposed rule change is
available on the Exchange’s Web site at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to establish
certain fees for the NYSE Trades and
NYSE RRP market data products.
Background
Current NYSE Trades Basic and
Broadcast Fees
In 2009, the Securities and Exchange
Commission (‘‘SEC’’ or the
‘‘Commission’’) approved the NYSE
Trades data feed and certain fees for it.4
NYSE Trades is a NYSE-only market
data feed that allows a vendor to
redistribute on a real-time basis the
same last sale information that the
Exchange reports under the
Consolidated Tape Association (‘‘CTA’’)
Plan for inclusion in the CTA Plan’s
consolidated data streams and certain
other related data elements.
Specifically, NYSE Trades includes the
real-time last sale price, time, size, and
bid/ask quotations for each security
traded on the Exchange and a stock
summary message. The stock summary
message updates every minute and
4 See Securities Exchange Act Release No. 59606
(Mar. 19, 2009), 74 FR 13293 (Mar. 26, 2009) (SR–
NYSE–2009–04).
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includes NYSE’s opening price, high
price, low price, closing price, and
cumulative volume for the security.
The Exchange currently charges NYSE
Trades data feed recipients an access fee
of $1,500 per month, and a subscriber
fee for professional subscribers of $15
per month per device, which may be
counted, at the election of the vendor
based on the number of ‘‘Subscriber
Entitlements’’ 5 (collectively, these fees
are referred to in this filing as ‘‘NYSE
Trades basic fees’’). In July 2012, the
Exchange added a fee for distribution by
television broadcasters (‘‘Broadcast
Fee’’), which is $40,000 per month.6
The television broadcast distribution
method differs from the other
distribution methods in that the data is
available in a temporary, view-only
mode on television screens.
Current NYSE RRP Fees
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The Exchange also offers NYSE RRP.7
NYSE RRP is designed for Web site
distribution and includes the real-time
last sale price and time for each security
traded on the Exchange as well as the
stock summary message, but does not
include the size of each trade or bid/ask
quotations.
The Exchange currently charges a flat
fee of $60,000 per month with no userbased fees for NYSE RRP. For that fee,
the vendor may provide NYSE RRP to
an unlimited number of the vendor’s
subscribers and customers without
having to differentiate between
professional subscribers and
nonprofessional subscribers, without
having to account for the extent of
access to the data, and without having
to report the number of users. As an
alternative to the NYSE RRP flat
monthly fee, the Exchange offers an
alternative fee of $.004 for each realtime reference price that a vendor
disseminates to its customers (‘‘per
query fee’’), which is capped at $60,000
per month, the same amount as the flat
fee. In order to take advantage of the
per-query fee, a vendor must document
that it has the ability to measure
accurately the number of queries and
must have the ability to report aggregate
query quantities on a monthly basis.
The per-query fee is imposed on
vendors, not end-users. There are
currently no fees for NYSE RRP that are
5 See
id. at n.5; Securities Exchange Act Release
No. 62038 (May 5, 2010), 75 FR 26825 (May 12,
2010) (SR–NYSE–2010–22).
6 See Securities Exchange Act Release No. 67467
(July 19, 2012), 77 FR 43636 (July 25, 2012) (SR–
NYSE–2012–28).
7 See Securities Exchange Act Release No. 61406
(Jan. 22, 2010), 75 FR 4600 (Jan. 28, 2010) (SR–
NYSE–2009–120).
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specifically designed for television or
mobile device distribution.
NYSE RRP was created to allow
distribution of a last sale data product
for reference purposes on Web sites at
a low cost that would facilitate
distribution to millions of retail
investors and relieve vendors of
administrative burdens.8 NYSE RRP is
an alternative to delayed prices and is
not intended for use in trading
decisions.9 As such, distribution of
NYSE RRP is subject to certain
requirements. Specifically, vendors may
not provide NYSE RRP in a context in
which a trading or order routing
decision can be implemented unless
CTA data is available in an equivalent
manner, must label NYSE RRP as NYSEonly data, and must provide a
hyperlinked notice similar to the one
provided for CTA delayed data.10
New Digital Media Offerings
The Exchange recently created a new
version of NYSE Trades, NYSE Trades
Digital Media, which will allow market
data vendors, television broadcasters,
Web site and mobile device service
providers, and others to distribute the
product to their customers for viewing
via television, Web site, and mobile
devices.11 The NYSE Trades Digital
Media product includes access to the
real-time last sale price, time, and size
for each security traded on the Exchange
as well as the stock summary message,
but does not include access to the bid/
ask quotation that is included with
NYSE Trades product under the basic
fees or Broadcast Fee. Vendors may not
provide the NYSE Trades Digital Media
product in a context in which a trading
or order routing decision can be
implemented unless CTA data is
available in an equivalent manner, must
label the product as NYSE-only data,
and must provide a hyperlinked notice
similar to the one provided for CTA
delayed data.
The Exchange also will offer NYSE
RRP Digital Media so that NYSE RRP
will be available for distribution in the
same manner as NYSE Trades Digital
Media, via television, Web site, and
mobile devices. The data elements of
NYSE RRP (last sale price, time, and
stock summary message) will remain
8 See Securities Exchange Act Release No. 55354
(Feb. 26, 2007), 72 FR 9817 (Mar. 5, 2007) (SR–
NYSE–2007–04) (proposing NYSE RRP pilot).
9 See Securities Exchange Act Release No. 60004
(May 29, 2009), 74 FR 26905 (June 4, 2009) (SR–
NYSE–2009–42) (making NYSE RRP pilot
permanent) (‘‘NYSE RRP Permanent Approval
Order’’).
10 Id.
11 See SR–NYSE–2013–23.
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unchanged from today’s NYSE RRP
product offering.
The Exchange has established these
Digital Media products in recognition of
the demand for a more seamless and
easier-to-administer data distribution
model that takes into account the
expanded variety of media and
communication devices that investors
utilize today. For example, a television
broadcaster could display the NYSE
Trades data during market-related
television programming and on its Web
site and allow its viewers to view the
data via their mobile devices, creating a
more seamless distribution model that
will allow investors more choice in how
they receive and view market data.
Proposed Digital Media Fees
The NYSE Trades Digital Media
Enterprise Fee will be $40,000 per
month, and the NYSE RRP Digital
Media Enterprise Fee will be $25,000
per month. The Exchange notes that the
NYSE RRP Digital Media Enterprise Fee
is lower than NYSE Trades Digital
Media Enterprise Fee because it does
not include trade size data. Vendors that
pay these fees will not be required to
pay an access fee, but they will be
required to pay the redistribution fees as
described below. As with the current
NYSE RRP product and the Broadcast
Fee, a vendor paying the Digital Media
Enterprise Fee may deliver the NYSE
Trades and NYSE RRP data to an
unlimited number of television, Web
site, and mobile device viewers without
having to differentiate between
professional subscribers and
nonprofessional subscribers, without
having to account for the extent of
access to the data, and without having
to report the number of users.
For NYSE Trades, the television-only
$40,000 Broadcast Fee option will no
longer be available. For NYSE RRP,
web-only distribution for $60,000 per
month will no longer be available. The
Exchange does not believe that any
customers would elect these options in
light of the broader distribution offered
with the new Digital Media Enterprise
Fees and the substantially lower price
for NYSE RRP Digital Media.
The Exchange will continue to offer
the $.004 per query fee for NYSE RRP
to any vendor that so chooses, but the
Exchange proposes to reduce the cap to
$25,000, the same amount as the NYSE
RRP Digital Media Enterprise Fee.
Vendors and subscribers receiving
NYSE Trades via traditional distribution
methods, e.g. a Bloomberg terminal or a
broker-dealer customer Web site that
permits order entry, will not be eligible
for Digital Media Enterprise Fees and
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will continue to pay NYSE Trades basic
fees.
Redistribution Fees
The Exchange also proposes to charge
a redistribution fee of $1,000 per month
for NYSE Trades and $1,500 per month
for NYSE RRP.12 The redistribution fees
will apply regardless of whether the
customer is eligible for the Digital
Media Enterprise Fees or NYSE Trades
basic fees.
Operative Date
The Digital Media Enterprise Fees
will be operative on April 1, 2013 and
the redistribution fees will be operative
on May 1, 2013.
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,13
in general, and Sections 6(b)(4) and
6(b)(5) of the Act,14 in particular, in that
it provides an equitable allocation of
reasonable fees among users and
recipients of the data and is not
designed to permit unfair
discrimination among customers,
issuers, and brokers.
The proposed NYSE Trades Digital
Media Enterprise Fee of $40,000 per
month and NYSE RRP Digital Media
Enterprise Fee of $25,000 per month are
reasonable because they will offer a
means for vendors to more widely
distribute NYSE Trades and NYSE RRP
data to investors for informational
purposes at the same cost (in the case
of NYSE Trades) or a lower cost (in the
case of NYSE RRP) than is available
today. Currently, NYSE Trades can be
distributed via television for a $40,000
monthly fee, but that fee does not
include Web site or mobile device
distribution. NYSE RRP can be
distributed over Web sites for a $60,000
monthly fee, but that fee does not
include television or mobile device
distribution. The Exchange believes that
the proposed Digital Media Enterprise
Fees are reasonable because in certain
instances they are less than the fees
charged by another exchange for a
similar product.15 The Exchange also
believes that it is reasonable to charge
more for NYSE Trades Digital Media
than NYSE RRP Digital Media because
12 A redistributor is a vendor or any other person
that provides an NYSE data product to a data
recipient or to any system that a data recipient uses,
irrespective of the means of transmission or access.
13 15 U.S.C. 78f(b).
14 15 U.S.C. 78f(b)(4), (5).
15 The NASDAQ Stock Market offers proprietary
last sale data products for distribution over the
Internet and television under alternative fee
schedules that are subject to a maximum fee is
$50,000 per month. See NASDAQ Rule 7039(b).
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the former includes trade size data. The
Exchange believes that the price
reduction for NYSE RRP coupled with
the broader distribution options will
make the product more attractive and
result in its greater availability to
investors. The Exchange believes that
reducing the cap for the per query fee
from $60,000 to $25,000 is reasonable
because it will be equal to the proposed
monthly NYSE RRP Digital Media
Enterprise Fee. The Exchange believes
that reducing the cap for the per query
fee is equitable and not unfairly
discriminatory because it is designed to
ensure that vendors that elect the per
query fee do not pay more for real-time
reference price data than vendors that
pay a flat fee for unlimited use.
The proposed Digital Media
Enterprise Fees also are equitable and
not unfairly discriminatory because they
will be applied uniformly to market data
vendors, television broadcasters, Web
site and mobile service providers, or any
other person that distributes the data on
the basis described in this filing. The
Exchange believes that it is appropriate
to offer a lower cost fee structure that is
designed to facilitate broader media
distribution of the NYSE Trades and
NYSE RRP data for informational
purposes because it will benefit
investors generally. Moreover, the value
of the data distributed generally in the
media for informational purposes differs
from when it is distributed in manner in
which it can immediately be utilized for
trading decisions. The Exchange
believes that the data is more valuable
in that latter context, and as such, it is
fair and equitable to have differential
pricing for it.
In establishing the Digital Media
Enterprise Fees, the Exchange
recognizes that there is demand for a
more seamless and easier-to-administer
data distribution model that takes into
account the expanded variety of media
and communication devices that
investors utilize today. As is the case
with the current NYSE RRP product and
the Broadcast Fee, the Exchange
believes that the Digital Media
Enterprise Fee will be easy to
administer because vendors that
purchase it will not have to differentiate
between professional subscribers and
nonprofessional subscribers, account for
the extent of access to the data, or report
the number of users; this is a significant
reduction in vendors’ administrative
burdens and is a significant value to
vendors. For example, a television
broadcaster could display the NYSE
Trades Digital Media data during
market-related television programming
and on its Web site and allow its
viewers to view the data via their
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mobile devices, creating a more
seamless distribution model that will
allow investors more choice in how they
receive and view market data, all
without having to account for and/or
measure who accesses the data and how
much they do so. By easing
administration, broadening distribution
channels, and, in the case of NYSE RRP,
reducing prices, the Exchange believes
that more vendors will choose to offer
NYSE Trades and NYSE RRP, thereby
expanding the distribution of market
data for the benefit of investors.
The proposed redistribution fees also
are reasonable because they are
comparable to other redistribution fees
charged by other exchanges.16 The
Exchange believes it is reasonable to
charge redistribution fees because
vendors receive value from
redistributing the data in their business
products for their customers. The
redistribution fees also are equitable and
not unfairly discriminatory because they
will be charged on an equal basis only
to those vendors that choose to
redistribute the data.
The decision of the United States
Court of Appeals for the District of
Columbia Circuit in NetCoalition v.
SEC, 615 F.3d 525 (D.C. Cir. 2010),
upheld the Commission’s reliance upon
the existence of competitive market
mechanisms to set reasonable and
equitably allocated fees for proprietary
market data.
In fact, the legislative history
indicates that the Congress intended
that the market system ‘evolve through
the interplay of competitive forces as
unnecessary regulatory restrictions are
removed’ and that the SEC wield its
regulatory power ‘in those situations
where competition may not be
sufficient,’ such as in the creation of a
‘consolidated transactional reporting
system.’
Id. at 535 (quoting H.R. Rep. No. 94–
229 at 92 (1975), as reprinted in 1975
U.S.C.C.A.N. 323). The court agreed
with the Commission’s conclusion that
‘‘Congress intended that ‘competitive
16 For example, NYSE Arca, Inc. (‘‘NYSE Arca’’)
and NYSE MKT LLC (‘‘NYSE MKT’’) charge
redistribution fees of $2,000 per month for certain
proprietary options market data products. See
Securities Exchange Act Release Nos. 68005 (Oct.
9, 2012), 77 FR 63362 (Oct. 16, 2012) (SR–
NYSEArca–2012–106), and 68004 (Oct. 9, 2012), 77
FR 62582 (Oct. 15, 2012) (SR–NYSEMKT–2012–49).
NYSE Arca charges a $3,000 per month
redistribution fee for the NYSE Arca Integrated
Feed. See Securities Exchange Act Release No.
66128 (Jan. 10, 2012), 77 FR 2331 (Jan. 17, 2012)
(SR–NYSEArca–2011–96). The Options Price
Reporting Authority’s Fee Schedule, available at
https://www.opradata.com/pdf/fee_schedule.pdf,
includes an ‘‘Internet Service Only’’ redistribution
fee ($650/month) and standard redistribution fee
($1,500/month).
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forces should dictate the services and
practices that constitute the U.S.
national market system for trading
equity securities.’ ’’ 17
As explained below in the Exchange’s
Statement on Burden on Competition,
the Exchange believes that there is
substantial evidence of competition in
the marketplace for data and that the
Commission can rely upon such
evidence in concluding that the fees
established in this filing are the product
of competition and therefore satisfy the
relevant statutory standards.18 In
addition, the existence of alternatives to
NYSE Trades and NYSE RRP, including
real-time consolidated data, free delayed
consolidated data, and proprietary last
sale data from other sources, as
described below, further ensures that
the Exchange cannot set unreasonable
fees, or fees that are unreasonably
discriminatory, when vendors and
subscribers can elect such alternatives.
As the NetCoalition decision noted,
the Commission is not required to
undertake a cost-of-service or
ratemaking approach, and the Exchange
incorporates by reference into this
proposed rule change its affiliate’s
analysis of this topic in another rule
filing.19
For these reasons, the Exchange
believes that the proposed fees are
reasonable, equitable, and not unfairly
discriminatory.
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. An
exchange’s ability to price its
proprietary data feed products is
constrained by (1) Actual competition
for the sale of proprietary market data
products, (2) the existence of
inexpensive real-time consolidated data
and free delayed consolidated data, and
(3) the inherent contestability of the
market for proprietary last sale data and
the joint product nature of exchange
platforms.
The Existence of Actual Competition.
The market for proprietary data
products is currently competitive and
inherently contestable because there is
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17 NetCoalition,
615 F.3d at 535.
916 of the Dodd-Frank Wall Street
Reform and Consumer Protection Act of 2010 (the
‘‘Dodd-Frank Act’’) amended paragraph (A) of
Section 19(b)(3) of the Act, 15 U.S.C. 78s(b)(3), to
make clear that all exchange fees for market data
may be filed by exchanges on an immediately
effective basis.
19 See Securities Exchange Act Release No. 63291
(Nov. 9, 2010), 75 FR 70311 (Nov. 17, 2010) (SR–
NYSEArca–2010–97).
18 Section
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fierce competition for the inputs
necessary to the creation of proprietary
data and strict pricing discipline for the
proprietary products themselves.
Numerous exchanges compete with
each other for listings and order flow
and sales of market data itself, providing
virtually limitless opportunities for
entrepreneurs who wish to compete in
any or all of those areas, including
producing and distributing their own
market data. Proprietary data products
are produced and distributed by each
individual exchange, as well as other
entities, in a vigorously competitive
market.
Competitive markets for listings, order
flow, executions, and transaction
reports provide pricing discipline for
the inputs of proprietary data products
and therefore constrain markets from
overpricing proprietary market data.
The U.S. Department of Justice also has
acknowledged the aggressive
competition among exchanges,
including for the sale of proprietary
market data itself. In announcing that
the bid for NYSE Euronext by NASDAQ
OMX Group Inc. and
IntercontinentalExchange Inc. had been
abandoned, Assistant Attorney General
Christine Varney stated that exchanges
‘‘compete head to head to offer real-time
equity data products. These data
products include the best bid and offer
of every exchange and information on
each equity trade, including the last
sale.’’ 20
It is common for broker-dealers to
further exploit this recognized
competitive constraint by sending their
order flow and transaction reports to
multiple markets, rather than providing
them all to a single market. As a 2010
Commission Concept Release noted, the
‘‘current market structure can be
described as dispersed and complex’’
with ‘‘trading volume * * * dispersed
among many highly automated trading
centers that compete for order flow in
the same stocks’’ and ‘‘trading centers
offer[ing] a wide range of services that
are designed to attract different types of
market participants with varying trading
needs.’’ 21
20 Press Release, U.S. Department of Justice,
Assistant Attorney General Christine Varney Holds
Conference Call Regarding NASDAQ OMX Group
Inc. and IntercontinentalExchange Inc. Abondoning
Their Bid for NYSE Euronext (May 16, 2011),
available at https://www.justice.gov/iso/opa/atr/
speeches/2011/at-speech-110516.html.
21 Concept Release on Equity Market Structure,
Securities Exchange Act Release No. 61358 (Jan. 14,
2010), 75 FR 3594 (Jan. 21, 2010) (File No. S7–02–
10). This Concept Release included data from the
third quarter of 2009 showing that no market center
traded more than 20% of the volume of listed
stocks, further evidencing the dispersal of and
competition for trading activity. Id. at 3598.
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In addition, in the case of products
that are distributed through market data
vendors, the market data vendors
themselves provide additional price
discipline for proprietary data products
because they control the primary means
of access to certain end users. These
vendors impose price discipline based
upon their business models. For
example, vendors that assess a
surcharge on data they sell are able to
refuse to offer proprietary products that
their end users do not or will not
purchase in sufficient numbers. Internet
portals, such as Google, impose price
discipline by providing only data that
they believe will enable them to attract
‘‘eyeballs’’ that contribute to their
advertising revenue. Similarly,
television broadcasters and Web site
and mobile device service providers
will not elect to make available NYSE
Trades or NYSE RRP unless they believe
it will help them attract or maintain
viewers/customers for their television,
Web site, or mobile device offerings. All
of these operate as constraints on
pricing proprietary data products.
Joint Platform. Transaction execution
and proprietary data products are
complementary in that market data is
both an input and a byproduct of the
execution service. In fact, market data
and trade executions are a paradigmatic
example of joint products with joint
costs. The decision whether and on
which platform to post an order will
depend on the attributes of the
platforms where the order can be
posted, including the execution fees,
data quality, and price and distribution
of their data products. The more trade
executions a platform does, the more
valuable its market data products
become.
The costs of producing market data
include not only the costs of the data
distribution infrastructure, but also the
costs of designing, maintaining, and
operating the exchange’s transaction
execution platform and the cost of
regulating the exchange to ensure its fair
operation and maintain investor
confidence. The total return that a
trading platform earns reflects the
revenues it receives from both products
and the joint costs it incurs. Moreover,
an exchange’s broker-dealer customers
view the costs of transaction executions
and market data as a unified cost of
doing business with the exchange.
Other market participants have noted
that the liquidity provided by the order
book, trade execution, core market data,
and non-core market data are joint
products of a joint platform and have
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TKELLEY on DSK3SPTVN1PROD with NOTICES
common costs.22 The Exchange agrees
with and adopts those discussions and
the arguments therein. The Exchange
also notes that the economics literature
confirms that there is no way to allocate
common costs between joint products
that would shed any light on
competitive or efficient pricing.23
Analyzing the cost of market data
product production and distribution in
isolation from the cost of all of the
inputs supporting the creation of market
data and market data products will
inevitably underestimate the cost of the
data and data products. Thus, because it
is impossible to obtain the data inputs
to create market data products without
a fast, technologically robust, and wellregulated execution system, system
costs and regulatory costs affect the
price of both of obtaining the market
data itself and creating and distributing
market data products. It would be
equally misleading, however, to
attribute all of an exchange’s costs to the
market data portion of an exchange’s
joint products. Rather, all of an
exchange’s costs are incurred for the
unified purposes of attracting order
22 See Securities Exchange Act Release No. 62887
(Sept. 10, 2010), 75 FR 57092, 57095 (Sept. 17,
2010) (SR–Phlx–2010–121); Securities Exchange
Act Release No. 62907 (Sept. 14, 2010), 75 FR
57314, 57317 (Sept. 20, 2010) (SR–NASDAQ–2010–
110); and Securities Exchange Act Release No.
62908 (Sept. 14, 2010), 75 FR 57321, 57324 (Sept.
20, 2010) (SR–NASDAQ–2010–111) (‘‘all of the
exchange’s costs are incurred for the unified
purposes of attracting order flow, executing and/or
routing orders, and generating and selling data
about market activity. The total return that an
exchange earns reflects the revenues it receives
from the joint products and the total costs of the
joint products.’’); see also August 1, 2008 Comment
Letter of Jeffrey S. Davis, Vice President and Deputy
General Counsel, NASDAQ OMX Group, Inc.,
Statement of Janusz Ordover and Gustavo
Bamberger (‘‘because market data is both an input
to and a byproduct of executing trades on a
particular platform, market data and trade
execution services are an example of ‘joint
products’ with ‘joint costs.’ ’’), attachment at pg. 4,
available at www.sec.gov/comments/34-57917/
3457917-12.pdf.
23 See generally Mark Hirschey, Fundamentals of
Managerial Economics, at 600 (2009) (‘‘It is
important to note, however, that although it is
possible to determine the separate marginal costs of
goods produced in variable proportions, it is
impossible to determine their individual average
costs. This is because common costs are expenses
necessary for manufacture of a joint product.
Common costs of production—raw material and
equipment costs, management expenses, and other
overhead—cannot be allocated to each individual
by-product on any economically sound basis.* * *
Any allocation of common costs is wrong and
arbitrary.’’). This is not new economic theory. See,
e.g., F. W. Taussig, ‘‘A Contribution to the Theory
of Railway Rates,’’ Quarterly Journal of Economics
V(4) 438, 465 (July 1891) (‘‘Yet, surely, the division
is purely arbitrary. These items of cost, in fact, are
jointly incurred for both sorts of traffic; and I cannot
share the hope entertained by the statistician of the
Commission, Professor Henry C. Adams, that we
shall ever reach a mode of apportionment that will
lead to trustworthy results.’’).
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17:59 Apr 09, 2013
Jkt 229001
flow, executing and/or routing orders,
and generating and selling data about
market activity. The total return that an
exchange earns reflects the revenues it
receives from the joint products and the
total costs of the joint products.
The level of competition and
contestability in the market is evident in
the numerous alternative venues that
compete for order flow, including 12
equities self-regulatory organization
(‘‘SRO’’) markets, as well as
internalizing broker-dealers (‘‘BDs’’) and
various forms of alternative trading
systems (‘‘ATSs’’), including dark pools
and electronic communication networks
(‘‘ECNs’’). Competition among trading
platforms can be expected to constrain
the aggregate return that each platform
earns from the sale of its joint products,
but different platforms may choose from
a range of possible, and equally
reasonable, pricing strategies as the
means of recovering total costs. For
example, some platforms may choose to
pay rebates to attract orders, charge
relatively low prices for market data
products (or provide market data
products free of charge), and charge
relatively high prices for accessing
posted liquidity. Other platforms may
choose a strategy of paying lower
rebates (or no rebates) to attract orders,
setting relatively high prices for market
data products, and setting relatively low
prices for accessing posted liquidity. In
this environment, there is no economic
basis for regulating maximum prices for
one of the joint products in an industry
in which suppliers face competitive
constraints with regard to the joint
offering.
Existence of Alternatives. The large
number of SROs, BDs, and ATSs that
currently produce proprietary data or
are currently capable of producing it
provides further pricing discipline for
proprietary data products. Each SRO,
ATS, and BD is currently permitted to
produce proprietary data products, and
many currently do or have announced
plans to do so, including but not limited
to the Exchange, NYSE MKT, NYSE
Arca, NASDAQ OMX, BATS, and Direct
Edge.
The fact that proprietary data from
ATSs, BDs, and vendors can bypass
SROs is significant in two respects.
First, non-SROs can compete directly
with SROs for the production and sale
of proprietary data products. Second,
because a single order or transaction
report can appear in an SRO proprietary
product, a non-SRO proprietary
product, or both, the amount of data
available via proprietary products is
greater in size than the actual number of
orders and transaction reports that exist
in the marketplace. Because market data
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Fmt 4703
Sfmt 4703
users can thus find suitable substitutes
for most proprietary market data
products, a market that overprices its
market data products stands a high risk
that users may substitute another source
of market data information for its own.
Moreover, consolidated data provides
two additional measures of pricing
discipline for proprietary data products
that are a subset of the consolidated data
stream. First, the consolidated data is
widely available in real-time at $1 per
month for non-professional users.
Second, consolidated data is also
available at no cost with a 15- or 20minute delay. Because consolidated
data contains marketwide information,
it effectively places a cap on the fees
assessed for proprietary data (such as
last sale data) that is simply a subset of
the consolidated data. The mere
availability of low-cost or free
consolidated data provides a powerful
form of pricing discipline for
proprietary data products that contain
data elements that are a subset of the
consolidated data by highlighting the
optional nature of proprietary products.
Those competitive pressure imposed
by available alternatives are evident in
the Exchange’s proposed pricing. The
Digital Media Enterprise Fees, which
will permit broader distribution at the
same price (in the case of NYSE Trades)
or a lower price (in the case of NYSE
RRP) than is available today, also are
lower than the maximum fee for a
similar product offered by another
exchange 24 and lower than the
television distribution fee charged by
CTA.25 The proposed redistribution fees
also are comparable to other exchanges’
similar fees.26
In addition to the competition and
price discipline described above, the
market for proprietary data products is
also highly contestable because market
entry is rapid and inexpensive. The
history of electronic trading is replete
with examples of entrants that swiftly
grew into some of the largest electronic
trading platforms and proprietary data
producers: Archipelago, Bloomberg
Tradebook, Island, RediBook, Attain,
TrackECN, BATS Trading and Direct
Edge. Today, BATS and Direct Edge
provide certain market data at no charge
on their Web sites in order to attract
more order flow, and use revenue
rebates from resulting additional
24 See
supra n.15.
CTA Plan dated July 1, 2012, Exhibit E,
Schedule A–1 at n.6 (television distribution fee
capped at $125,000 per month in 2010, with certain
increases permitted thereafter) available at https://
www.nyxdata.com/CTA.
26 See supra n.16.
25 See
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executions to maintain low execution
charges for their users.27
Further, data products are valuable to
certain end users only insofar as they
provide information that end users
expect will assist them or their
customers in tracking prices and market
trends. The Exchange believes that the
Digital Media Enterprise Fees, which
will permit wider distribution of last
sale information at a lower price, may
encourage more vendors to choose to
offer NYSE Trades or NYSE RRP over
multiple communication devices and
thereby benefit public investors and
other market participants by providing
them with more convenient ways to
track prices and market trends during
the course of the trading day. The
Exchange further believes that only
vendors that expect to derive a
reasonable benefit from redistributing
NYSE Trades and NYSE RRP data will
choose to become redistributors and pay
the attendant monthly fees.
In establishing the proposed fees, the
Exchange considered the
competitiveness of the market for
proprietary data and all of the
implications of that competition. The
Exchange believes that it has considered
all relevant factors and has not
considered irrelevant factors in order to
establish fair, reasonable, and not
unreasonably discriminatory fees and an
equitable allocation of fees among all
users. The existence of numerous
alternatives to the Exchange’s products,
including real-time consolidated data,
free delayed consolidated data, and
proprietary data from other sources,
ensures that the Exchange cannot set
unreasonable fees, or fees that are
unreasonably discriminatory, when
vendors and subscribers can elect these
alternatives or choose not to purchase a
specific proprietary data product if its
cost to purchase is not justified by the
returns any particular vendor or
subscriber would achieve through the
purchase.
TKELLEY on DSK3SPTVN1PROD with NOTICES
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
No written comments were solicited
or received with respect to the proposed
rule change.
27 This is simply a securities market-specific
example of the well-established principle that in
certain circumstances more sales at lower margins
can be more profitable than fewer sales at higher
margins; this example is additional evidence that
market data is an inherent part of a market’s joint
platform.
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III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective
upon filing pursuant to Section
19(b)(3)(A) 28 of the Act and
subparagraph (f)(2) of Rule 19b–4 29
thereunder, because it establishes a due,
fee, or other charge imposed by the
Exchange.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 30 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
Number SR–NYSE–2013–24 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
Number SR–NYSE–2013–24. This file
number should be included on the
subject line if email is used.
To help the Commission process and
review your comments more efficiently,
please use only one method. The
Commission will post all comments on
the Commission’s Internet 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 Web site viewing and
printing in the Commission’s Public
Reference Room on official business
days between the hours of 10:00 a.m.
and 3:00 p.m. Copies of such filing also
will be available for inspection and
copying at the principal offices of
NYSE. All comments received will be
posted without change; the Commission
does not edit personal identifying
information from submissions. You
should submit only information that
you wish to make available publicly. All
submissions should refer to File
Number SR–NYSE–2013–24, and
should be submitted on or before May
1, 2013.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.31
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2013–08324 Filed 4–9–13; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–69300; File No. SR–
NYSEMKT–2013–31]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Establishing Certain Fees
for the NYSE MKT Trades and NYSE
MKT Realtime Reference Prices Market
Data Products
Dated: April 4, 2013.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on March
21, 2013, NYSE MKT LLC (the
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
31 17
28 15
U.S.C. 78s(b)(3)(A).
29 17 CFR 240.19b–4(f)(2).
30 15 U.S.C. 78s(b)(2)(B).
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21469
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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]]>Agencies
[Federal Register Volume 78, Number 69 (Wednesday, April 10, 2013)]
[Notices]
[Pages 21464-21469]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-08324]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-69298; File No. SR-NYSE-2013-24]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Establish Certain Fees for the NYSE Trades and NYSE Realtime Reference
Prices Market Data Products
April 4, 2013.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (the ``Act'') \2\ and Rule 19b-4 thereunder,\3\ notice is hereby
given that, on March 21, 2013, New York Stock Exchange LLC (``NYSE'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(the ``Commission'') the proposed rule change as described in Items I,
II, and III below, which Items have been prepared by the self-
regulatory organization. The Commission is publishing this notice to
solicit comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to establish certain fees for the NYSE Trades
and NYSE Realtime Reference Prices (``NYSE RRP'') market data products.
The text of the proposed rule change is available on the Exchange's Web
site at www.nyse.com, at the principal office of the Exchange, and at
the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the self-regulatory organization
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 those statements may be examined at
the places specified in Item IV below. The Exchange has prepared
summaries, set forth in sections A, B, and C below, of the most
significant parts of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to establish certain fees for the NYSE Trades
and NYSE RRP market data products.
Background
Current NYSE Trades Basic and Broadcast Fees
In 2009, the Securities and Exchange Commission (``SEC'' or the
``Commission'') approved the NYSE Trades data feed and certain fees for
it.\4\ NYSE Trades is a NYSE-only market data feed that allows a vendor
to redistribute on a real-time basis the same last sale information
that the Exchange reports under the Consolidated Tape Association
(``CTA'') Plan for inclusion in the CTA Plan's consolidated data
streams and certain other related data elements. Specifically, NYSE
Trades includes the real-time last sale price, time, size, and bid/ask
quotations for each security traded on the Exchange and a stock summary
message. The stock summary message updates every minute and
[[Page 21465]]
includes NYSE's opening price, high price, low price, closing price,
and cumulative volume for the security.
---------------------------------------------------------------------------
\4\ See Securities Exchange Act Release No. 59606 (Mar. 19,
2009), 74 FR 13293 (Mar. 26, 2009) (SR-NYSE-2009-04).
---------------------------------------------------------------------------
The Exchange currently charges NYSE Trades data feed recipients an
access fee of $1,500 per month, and a subscriber fee for professional
subscribers of $15 per month per device, which may be counted, at the
election of the vendor based on the number of ``Subscriber
Entitlements'' \5\ (collectively, these fees are referred to in this
filing as ``NYSE Trades basic fees''). In July 2012, the Exchange added
a fee for distribution by television broadcasters (``Broadcast Fee''),
which is $40,000 per month.\6\ The television broadcast distribution
method differs from the other distribution methods in that the data is
available in a temporary, view-only mode on television screens.
---------------------------------------------------------------------------
\5\ See id. at n.5; Securities Exchange Act Release No. 62038
(May 5, 2010), 75 FR 26825 (May 12, 2010) (SR-NYSE-2010-22).
\6\ See Securities Exchange Act Release No. 67467 (July 19,
2012), 77 FR 43636 (July 25, 2012) (SR-NYSE-2012-28).
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Current NYSE RRP Fees
The Exchange also offers NYSE RRP.\7\ NYSE RRP is designed for Web
site distribution and includes the real-time last sale price and time
for each security traded on the Exchange as well as the stock summary
message, but does not include the size of each trade or bid/ask
quotations.
---------------------------------------------------------------------------
\7\ See Securities Exchange Act Release No. 61406 (Jan. 22,
2010), 75 FR 4600 (Jan. 28, 2010) (SR-NYSE-2009-120).
---------------------------------------------------------------------------
The Exchange currently charges a flat fee of $60,000 per month with
no user-based fees for NYSE RRP. For that fee, the vendor may provide
NYSE RRP to an unlimited number of the vendor's subscribers and
customers without having to differentiate between professional
subscribers and nonprofessional subscribers, without having to account
for the extent of access to the data, and without having to report the
number of users. As an alternative to the NYSE RRP flat monthly fee,
the Exchange offers an alternative fee of $.004 for each real-time
reference price that a vendor disseminates to its customers (``per
query fee''), which is capped at $60,000 per month, the same amount as
the flat fee. In order to take advantage of the per-query fee, a vendor
must document that it has the ability to measure accurately the number
of queries and must have the ability to report aggregate query
quantities on a monthly basis. The per-query fee is imposed on vendors,
not end-users. There are currently no fees for NYSE RRP that are
specifically designed for television or mobile device distribution.
NYSE RRP was created to allow distribution of a last sale data
product for reference purposes on Web sites at a low cost that would
facilitate distribution to millions of retail investors and relieve
vendors of administrative burdens.\8\ NYSE RRP is an alternative to
delayed prices and is not intended for use in trading decisions.\9\ As
such, distribution of NYSE RRP is subject to certain requirements.
Specifically, vendors may not provide NYSE RRP in a context in which a
trading or order routing decision can be implemented unless CTA data is
available in an equivalent manner, must label NYSE RRP as NYSE-only
data, and must provide a hyperlinked notice similar to the one provided
for CTA delayed data.\10\
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 55354 (Feb. 26,
2007), 72 FR 9817 (Mar. 5, 2007) (SR-NYSE-2007-04) (proposing NYSE
RRP pilot).
\9\ See Securities Exchange Act Release No. 60004 (May 29,
2009), 74 FR 26905 (June 4, 2009) (SR-NYSE-2009-42) (making NYSE RRP
pilot permanent) (``NYSE RRP Permanent Approval Order'').
\10\ Id.
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New Digital Media Offerings
The Exchange recently created a new version of NYSE Trades, NYSE
Trades Digital Media, which will allow market data vendors, television
broadcasters, Web site and mobile device service providers, and others
to distribute the product to their customers for viewing via
television, Web site, and mobile devices.\11\ The NYSE Trades Digital
Media product includes access to the real-time last sale price, time,
and size for each security traded on the Exchange as well as the stock
summary message, but does not include access to the bid/ask quotation
that is included with NYSE Trades product under the basic fees or
Broadcast Fee. Vendors may not provide the NYSE Trades Digital Media
product in a context in which a trading or order routing decision can
be implemented unless CTA data is available in an equivalent manner,
must label the product as NYSE-only data, and must provide a
hyperlinked notice similar to the one provided for CTA delayed data.
---------------------------------------------------------------------------
\11\ See SR-NYSE-2013-23.
---------------------------------------------------------------------------
The Exchange also will offer NYSE RRP Digital Media so that NYSE
RRP will be available for distribution in the same manner as NYSE
Trades Digital Media, via television, Web site, and mobile devices. The
data elements of NYSE RRP (last sale price, time, and stock summary
message) will remain unchanged from today's NYSE RRP product offering.
The Exchange has established these Digital Media products in
recognition of the demand for a more seamless and easier-to-administer
data distribution model that takes into account the expanded variety of
media and communication devices that investors utilize today. For
example, a television broadcaster could display the NYSE Trades data
during market-related television programming and on its Web site and
allow its viewers to view the data via their mobile devices, creating a
more seamless distribution model that will allow investors more choice
in how they receive and view market data.
Proposed Digital Media Fees
The NYSE Trades Digital Media Enterprise Fee will be $40,000 per
month, and the NYSE RRP Digital Media Enterprise Fee will be $25,000
per month. The Exchange notes that the NYSE RRP Digital Media
Enterprise Fee is lower than NYSE Trades Digital Media Enterprise Fee
because it does not include trade size data. Vendors that pay these
fees will not be required to pay an access fee, but they will be
required to pay the redistribution fees as described below. As with the
current NYSE RRP product and the Broadcast Fee, a vendor paying the
Digital Media Enterprise Fee may deliver the NYSE Trades and NYSE RRP
data to an unlimited number of television, Web site, and mobile device
viewers without having to differentiate between professional
subscribers and nonprofessional subscribers, without having to account
for the extent of access to the data, and without having to report the
number of users.
For NYSE Trades, the television-only $40,000 Broadcast Fee option
will no longer be available. For NYSE RRP, web-only distribution for
$60,000 per month will no longer be available. The Exchange does not
believe that any customers would elect these options in light of the
broader distribution offered with the new Digital Media Enterprise Fees
and the substantially lower price for NYSE RRP Digital Media.
The Exchange will continue to offer the $.004 per query fee for
NYSE RRP to any vendor that so chooses, but the Exchange proposes to
reduce the cap to $25,000, the same amount as the NYSE RRP Digital
Media Enterprise Fee. Vendors and subscribers receiving NYSE Trades via
traditional distribution methods, e.g. a Bloomberg terminal or a
broker-dealer customer Web site that permits order entry, will not be
eligible for Digital Media Enterprise Fees and
[[Page 21466]]
will continue to pay NYSE Trades basic fees.
Redistribution Fees
The Exchange also proposes to charge a redistribution fee of $1,000
per month for NYSE Trades and $1,500 per month for NYSE RRP.\12\ The
redistribution fees will apply regardless of whether the customer is
eligible for the Digital Media Enterprise Fees or NYSE Trades basic
fees.
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\12\ A redistributor is a vendor or any other person that
provides an NYSE data product to a data recipient or to any system
that a data recipient uses, irrespective of the means of
transmission or access.
---------------------------------------------------------------------------
Operative Date
The Digital Media Enterprise Fees will be operative on April 1,
2013 and the redistribution fees will be operative on May 1, 2013.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\13\ in general, and
Sections 6(b)(4) and 6(b)(5) of the Act,\14\ in particular, in that it
provides an equitable allocation of reasonable fees among users and
recipients of the data and is not designed to permit unfair
discrimination among customers, issuers, and brokers.
---------------------------------------------------------------------------
\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4), (5).
---------------------------------------------------------------------------
The proposed NYSE Trades Digital Media Enterprise Fee of $40,000
per month and NYSE RRP Digital Media Enterprise Fee of $25,000 per
month are reasonable because they will offer a means for vendors to
more widely distribute NYSE Trades and NYSE RRP data to investors for
informational purposes at the same cost (in the case of NYSE Trades) or
a lower cost (in the case of NYSE RRP) than is available today.
Currently, NYSE Trades can be distributed via television for a $40,000
monthly fee, but that fee does not include Web site or mobile device
distribution. NYSE RRP can be distributed over Web sites for a $60,000
monthly fee, but that fee does not include television or mobile device
distribution. The Exchange believes that the proposed Digital Media
Enterprise Fees are reasonable because in certain instances they are
less than the fees charged by another exchange for a similar
product.\15\ The Exchange also believes that it is reasonable to charge
more for NYSE Trades Digital Media than NYSE RRP Digital Media because
the former includes trade size data. The Exchange believes that the
price reduction for NYSE RRP coupled with the broader distribution
options will make the product more attractive and result in its greater
availability to investors. The Exchange believes that reducing the cap
for the per query fee from $60,000 to $25,000 is reasonable because it
will be equal to the proposed monthly NYSE RRP Digital Media Enterprise
Fee. The Exchange believes that reducing the cap for the per query fee
is equitable and not unfairly discriminatory because it is designed to
ensure that vendors that elect the per query fee do not pay more for
real-time reference price data than vendors that pay a flat fee for
unlimited use.
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\15\ The NASDAQ Stock Market offers proprietary last sale data
products for distribution over the Internet and television under
alternative fee schedules that are subject to a maximum fee is
$50,000 per month. See NASDAQ Rule 7039(b).
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The proposed Digital Media Enterprise Fees also are equitable and
not unfairly discriminatory because they will be applied uniformly to
market data vendors, television broadcasters, Web site and mobile
service providers, or any other person that distributes the data on the
basis described in this filing. The Exchange believes that it is
appropriate to offer a lower cost fee structure that is designed to
facilitate broader media distribution of the NYSE Trades and NYSE RRP
data for informational purposes because it will benefit investors
generally. Moreover, the value of the data distributed generally in the
media for informational purposes differs from when it is distributed in
manner in which it can immediately be utilized for trading decisions.
The Exchange believes that the data is more valuable in that latter
context, and as such, it is fair and equitable to have differential
pricing for it.
In establishing the Digital Media Enterprise Fees, the Exchange
recognizes that there is demand for a more seamless and easier-to-
administer data distribution model that takes into account the expanded
variety of media and communication devices that investors utilize
today. As is the case with the current NYSE RRP product and the
Broadcast Fee, the Exchange believes that the Digital Media Enterprise
Fee will be easy to administer because vendors that purchase it will
not have to differentiate between professional subscribers and
nonprofessional subscribers, account for the extent of access to the
data, or report the number of users; this is a significant reduction in
vendors' administrative burdens and is a significant value to vendors.
For example, a television broadcaster could display the NYSE Trades
Digital Media data during market-related television programming and on
its Web site and allow its viewers to view the data via their mobile
devices, creating a more seamless distribution model that will allow
investors more choice in how they receive and view market data, all
without having to account for and/or measure who accesses the data and
how much they do so. By easing administration, broadening distribution
channels, and, in the case of NYSE RRP, reducing prices, the Exchange
believes that more vendors will choose to offer NYSE Trades and NYSE
RRP, thereby expanding the distribution of market data for the benefit
of investors.
The proposed redistribution fees also are reasonable because they
are comparable to other redistribution fees charged by other
exchanges.\16\ The Exchange believes it is reasonable to charge
redistribution fees because vendors receive value from redistributing
the data in their business products for their customers. The
redistribution fees also are equitable and not unfairly discriminatory
because they will be charged on an equal basis only to those vendors
that choose to redistribute the data.
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\16\ For example, NYSE Arca, Inc. (``NYSE Arca'') and NYSE MKT
LLC (``NYSE MKT'') charge redistribution fees of $2,000 per month
for certain proprietary options market data products. See Securities
Exchange Act Release Nos. 68005 (Oct. 9, 2012), 77 FR 63362 (Oct.
16, 2012) (SR-NYSEArca-2012-106), and 68004 (Oct. 9, 2012), 77 FR
62582 (Oct. 15, 2012) (SR-NYSEMKT-2012-49). NYSE Arca charges a
$3,000 per month redistribution fee for the NYSE Arca Integrated
Feed. See Securities Exchange Act Release No. 66128 (Jan. 10, 2012),
77 FR 2331 (Jan. 17, 2012) (SR-NYSEArca-2011-96). The Options Price
Reporting Authority's Fee Schedule, available at https://www.opradata.com/pdf/fee_schedule.pdf, includes an ``Internet
Service Only'' redistribution fee ($650/month) and standard
redistribution fee ($1,500/month).
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The decision of the United States Court of Appeals for the District
of Columbia Circuit in NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir.
2010), upheld the Commission's reliance upon the existence of
competitive market mechanisms to set reasonable and equitably allocated
fees for proprietary market data.
In fact, the legislative history indicates that the Congress
intended that the market system `evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are removed'
and that the SEC wield its regulatory power `in those situations where
competition may not be sufficient,' such as in the creation of a
`consolidated transactional reporting system.'
Id. at 535 (quoting H.R. Rep. No. 94-229 at 92 (1975), as reprinted
in 1975 U.S.C.C.A.N. 323). The court agreed with the Commission's
conclusion that ``Congress intended that `competitive
[[Page 21467]]
forces should dictate the services and practices that constitute the
U.S. national market system for trading equity securities.' '' \17\
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\17\ NetCoalition, 615 F.3d at 535.
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As explained below in the Exchange's Statement on Burden on
Competition, the Exchange believes that there is substantial evidence
of competition in the marketplace for data and that the Commission can
rely upon such evidence in concluding that the fees established in this
filing are the product of competition and therefore satisfy the
relevant statutory standards.\18\ In addition, the existence of
alternatives to NYSE Trades and NYSE RRP, including real-time
consolidated data, free delayed consolidated data, and proprietary last
sale data from other sources, as described below, further ensures that
the Exchange cannot set unreasonable fees, or fees that are
unreasonably discriminatory, when vendors and subscribers can elect
such alternatives.
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\18\ Section 916 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (the ``Dodd-Frank Act'') amended
paragraph (A) of Section 19(b)(3) of the Act, 15 U.S.C. 78s(b)(3),
to make clear that all exchange fees for market data may be filed by
exchanges on an immediately effective basis.
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As the NetCoalition decision noted, the Commission is not required
to undertake a cost-of-service or ratemaking approach, and the Exchange
incorporates by reference into this proposed rule change its
affiliate's analysis of this topic in another rule filing.\19\
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\19\ See Securities Exchange Act Release No. 63291 (Nov. 9,
2010), 75 FR 70311 (Nov. 17, 2010) (SR-NYSEArca-2010-97).
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For these reasons, the Exchange believes that the proposed fees are
reasonable, equitable, and not unfairly discriminatory.
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. An exchange's ability to
price its proprietary data feed products is constrained by (1) Actual
competition for the sale of proprietary market data products, (2) the
existence of inexpensive real-time consolidated data and free delayed
consolidated data, and (3) the inherent contestability of the market
for proprietary last sale data and the joint product nature of exchange
platforms.
The Existence of Actual Competition. The market for proprietary
data products is currently competitive and inherently contestable
because there is fierce competition for the inputs necessary to the
creation of proprietary data and strict pricing discipline for the
proprietary products themselves. Numerous exchanges compete with each
other for listings and order flow and sales of market data itself,
providing virtually limitless opportunities for entrepreneurs who wish
to compete in any or all of those areas, including producing and
distributing their own market data. Proprietary data products are
produced and distributed by each individual exchange, as well as other
entities, in a vigorously competitive market.
Competitive markets for listings, order flow, executions, and
transaction reports provide pricing discipline for the inputs of
proprietary data products and therefore constrain markets from
overpricing proprietary market data. The U.S. Department of Justice
also has acknowledged the aggressive competition among exchanges,
including for the sale of proprietary market data itself. In announcing
that the bid for NYSE Euronext by NASDAQ OMX Group Inc. and
IntercontinentalExchange Inc. had been abandoned, Assistant Attorney
General Christine Varney stated that exchanges ``compete head to head
to offer real-time equity data products. These data products include
the best bid and offer of every exchange and information on each equity
trade, including the last sale.'' \20\
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\20\ Press Release, U.S. Department of Justice, Assistant
Attorney General Christine Varney Holds Conference Call Regarding
NASDAQ OMX Group Inc. and IntercontinentalExchange Inc. Abondoning
Their Bid for NYSE Euronext (May 16, 2011), available at https://www.justice.gov/iso/opa/atr/speeches/2011/at-speech-110516.html.
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It is common for broker-dealers to further exploit this recognized
competitive constraint by sending their order flow and transaction
reports to multiple markets, rather than providing them all to a single
market. As a 2010 Commission Concept Release noted, the ``current
market structure can be described as dispersed and complex'' with
``trading volume * * * dispersed among many highly automated trading
centers that compete for order flow in the same stocks'' and ``trading
centers offer[ing] a wide range of services that are designed to
attract different types of market participants with varying trading
needs.'' \21\
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\21\ Concept Release on Equity Market Structure, Securities
Exchange Act Release No. 61358 (Jan. 14, 2010), 75 FR 3594 (Jan. 21,
2010) (File No. S7-02-10). This Concept Release included data from
the third quarter of 2009 showing that no market center traded more
than 20% of the volume of listed stocks, further evidencing the
dispersal of and competition for trading activity. Id. at 3598.
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In addition, in the case of products that are distributed through
market data vendors, the market data vendors themselves provide
additional price discipline for proprietary data products because they
control the primary means of access to certain end users. These vendors
impose price discipline based upon their business models. For example,
vendors that assess a surcharge on data they sell are able to refuse to
offer proprietary products that their end users do not or will not
purchase in sufficient numbers. Internet portals, such as Google,
impose price discipline by providing only data that they believe will
enable them to attract ``eyeballs'' that contribute to their
advertising revenue. Similarly, television broadcasters and Web site
and mobile device service providers will not elect to make available
NYSE Trades or NYSE RRP unless they believe it will help them attract
or maintain viewers/customers for their television, Web site, or mobile
device offerings. All of these operate as constraints on pricing
proprietary data products.
Joint Platform. Transaction execution and proprietary data products
are complementary in that market data is both an input and a byproduct
of the execution service. In fact, market data and trade executions are
a paradigmatic example of joint products with joint costs. The decision
whether and on which platform to post an order will depend on the
attributes of the platforms where the order can be posted, including
the execution fees, data quality, and price and distribution of their
data products. The more trade executions a platform does, the more
valuable its market data products become.
The costs of producing market data include not only the costs of
the data distribution infrastructure, but also the costs of designing,
maintaining, and operating the exchange's transaction execution
platform and the cost of regulating the exchange to ensure its fair
operation and maintain investor confidence. The total return that a
trading platform earns reflects the revenues it receives from both
products and the joint costs it incurs. Moreover, an exchange's broker-
dealer customers view the costs of transaction executions and market
data as a unified cost of doing business with the exchange.
Other market participants have noted that the liquidity provided by
the order book, trade execution, core market data, and non-core market
data are joint products of a joint platform and have
[[Page 21468]]
common costs.\22\ The Exchange agrees with and adopts those discussions
and the arguments therein. The Exchange also notes that the economics
literature confirms that there is no way to allocate common costs
between joint products that would shed any light on competitive or
efficient pricing.\23\
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\22\ See Securities Exchange Act Release No. 62887 (Sept. 10,
2010), 75 FR 57092, 57095 (Sept. 17, 2010) (SR-Phlx-2010-121);
Securities Exchange Act Release No. 62907 (Sept. 14, 2010), 75 FR
57314, 57317 (Sept. 20, 2010) (SR-NASDAQ-2010-110); and Securities
Exchange Act Release No. 62908 (Sept. 14, 2010), 75 FR 57321, 57324
(Sept. 20, 2010) (SR-NASDAQ-2010-111) (``all of the exchange's costs
are incurred for the unified purposes of attracting order flow,
executing and/or routing orders, and generating and selling data
about market activity. The total return that an exchange earns
reflects the revenues it receives from the joint products and the
total costs of the joint products.''); see also August 1, 2008
Comment Letter of Jeffrey S. Davis, Vice President and Deputy
General Counsel, NASDAQ OMX Group, Inc., Statement of Janusz Ordover
and Gustavo Bamberger (``because market data is both an input to and
a byproduct of executing trades on a particular platform, market
data and trade execution services are an example of `joint products'
with `joint costs.' ''), attachment at pg. 4, available at
www.sec.gov/comments/34-57917/3457917-12.pdf.
\23\ See generally Mark Hirschey, Fundamentals of Managerial
Economics, at 600 (2009) (``It is important to note, however, that
although it is possible to determine the separate marginal costs of
goods produced in variable proportions, it is impossible to
determine their individual average costs. This is because common
costs are expenses necessary for manufacture of a joint product.
Common costs of production--raw material and equipment costs,
management expenses, and other overhead--cannot be allocated to each
individual by-product on any economically sound basis.* * * Any
allocation of common costs is wrong and arbitrary.''). This is not
new economic theory. See, e.g., F. W. Taussig, ``A Contribution to
the Theory of Railway Rates,'' Quarterly Journal of Economics V(4)
438, 465 (July 1891) (``Yet, surely, the division is purely
arbitrary. These items of cost, in fact, are jointly incurred for
both sorts of traffic; and I cannot share the hope entertained by
the statistician of the Commission, Professor Henry C. Adams, that
we shall ever reach a mode of apportionment that will lead to
trustworthy results.'').
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Analyzing the cost of market data product production and
distribution in isolation from the cost of all of the inputs supporting
the creation of market data and market data products will inevitably
underestimate the cost of the data and data products. Thus, because it
is impossible to obtain the data inputs to create market data products
without a fast, technologically robust, and well-regulated execution
system, system costs and regulatory costs affect the price of both of
obtaining the market data itself and creating and distributing market
data products. It would be equally misleading, however, to attribute
all of an exchange's costs to the market data portion of an exchange's
joint products. Rather, all of an exchange's costs are incurred for the
unified purposes of attracting order flow, executing and/or routing
orders, and generating and selling data about market activity. The
total return that an exchange earns reflects the revenues it receives
from the joint products and the total costs of the joint products.
The level of competition and contestability in the market is
evident in the numerous alternative venues that compete for order flow,
including 12 equities self-regulatory organization (``SRO'') markets,
as well as internalizing broker-dealers (``BDs'') and various forms of
alternative trading systems (``ATSs''), including dark pools and
electronic communication networks (``ECNs''). Competition among trading
platforms can be expected to constrain the aggregate return that each
platform earns from the sale of its joint products, but different
platforms may choose from a range of possible, and equally reasonable,
pricing strategies as the means of recovering total costs. For example,
some platforms may choose to pay rebates to attract orders, charge
relatively low prices for market data products (or provide market data
products free of charge), and charge relatively high prices for
accessing posted liquidity. Other platforms may choose a strategy of
paying lower rebates (or no rebates) to attract orders, setting
relatively high prices for market data products, and setting relatively
low prices for accessing posted liquidity. In this environment, there
is no economic basis for regulating maximum prices for one of the joint
products in an industry in which suppliers face competitive constraints
with regard to the joint offering.
Existence of Alternatives. The large number of SROs, BDs, and ATSs
that currently produce proprietary data or are currently capable of
producing it provides further pricing discipline for proprietary data
products. Each SRO, ATS, and BD is currently permitted to produce
proprietary data products, and many currently do or have announced
plans to do so, including but not limited to the Exchange, NYSE MKT,
NYSE Arca, NASDAQ OMX, BATS, and Direct Edge.
The fact that proprietary data from ATSs, BDs, and vendors can
bypass SROs is significant in two respects. First, non-SROs can compete
directly with SROs for the production and sale of proprietary data
products. Second, because a single order or transaction report can
appear in an SRO proprietary product, a non-SRO proprietary product, or
both, the amount of data available via proprietary products is greater
in size than the actual number of orders and transaction reports that
exist in the marketplace. Because market data users can thus find
suitable substitutes for most proprietary market data products, a
market that overprices its market data products stands a high risk that
users may substitute another source of market data information for its
own.
Moreover, consolidated data provides two additional measures of
pricing discipline for proprietary data products that are a subset of
the consolidated data stream. First, the consolidated data is widely
available in real-time at $1 per month for non-professional users.
Second, consolidated data is also available at no cost with a 15- or
20-minute delay. Because consolidated data contains marketwide
information, it effectively places a cap on the fees assessed for
proprietary data (such as last sale data) that is simply a subset of
the consolidated data. The mere availability of low-cost or free
consolidated data provides a powerful form of pricing discipline for
proprietary data products that contain data elements that are a subset
of the consolidated data by highlighting the optional nature of
proprietary products.
Those competitive pressure imposed by available alternatives are
evident in the Exchange's proposed pricing. The Digital Media
Enterprise Fees, which will permit broader distribution at the same
price (in the case of NYSE Trades) or a lower price (in the case of
NYSE RRP) than is available today, also are lower than the maximum fee
for a similar product offered by another exchange \24\ and lower than
the television distribution fee charged by CTA.\25\ The proposed
redistribution fees also are comparable to other exchanges' similar
fees.\26\
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\24\ See supra n.15.
\25\ See CTA Plan dated July 1, 2012, Exhibit E, Schedule A-1 at
n.6 (television distribution fee capped at $125,000 per month in
2010, with certain increases permitted thereafter) available at
https://www.nyxdata.com/CTA.
\26\ See supra n.16.
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In addition to the competition and price discipline described
above, the market for proprietary data products is also highly
contestable because market entry is rapid and inexpensive. The history
of electronic trading is replete with examples of entrants that swiftly
grew into some of the largest electronic trading platforms and
proprietary data producers: Archipelago, Bloomberg Tradebook, Island,
RediBook, Attain, TrackECN, BATS Trading and Direct Edge. Today, BATS
and Direct Edge provide certain market data at no charge on their Web
sites in order to attract more order flow, and use revenue rebates from
resulting additional
[[Page 21469]]
executions to maintain low execution charges for their users.\27\
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\27\ This is simply a securities market-specific example of the
well-established principle that in certain circumstances more sales
at lower margins can be more profitable than fewer sales at higher
margins; this example is additional evidence that market data is an
inherent part of a market's joint platform.
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Further, data products are valuable to certain end users only
insofar as they provide information that end users expect will assist
them or their customers in tracking prices and market trends. The
Exchange believes that the Digital Media Enterprise Fees, which will
permit wider distribution of last sale information at a lower price,
may encourage more vendors to choose to offer NYSE Trades or NYSE RRP
over multiple communication devices and thereby benefit public
investors and other market participants by providing them with more
convenient ways to track prices and market trends during the course of
the trading day. The Exchange further believes that only vendors that
expect to derive a reasonable benefit from redistributing NYSE Trades
and NYSE RRP data will choose to become redistributors and pay the
attendant monthly fees.
In establishing the proposed fees, the Exchange considered the
competitiveness of the market for proprietary data and all of the
implications of that competition. The Exchange believes that it has
considered all relevant factors and has not considered irrelevant
factors in order to establish fair, reasonable, and not unreasonably
discriminatory fees and an equitable allocation of fees among all
users. The existence of numerous alternatives to the Exchange's
products, including real-time consolidated data, free delayed
consolidated data, and proprietary data from other sources, ensures
that the Exchange cannot set unreasonable fees, or fees that are
unreasonably discriminatory, when vendors and subscribers can elect
these alternatives or choose not to purchase a specific proprietary
data product if its cost to purchase is not justified by the returns
any particular vendor or subscriber would achieve through the purchase.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \28\ of the Act and subparagraph (f)(2) of Rule
19b-4 \29\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\28\ 15 U.S.C. 78s(b)(3)(A).
\29\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \30\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\30\ 15 U.S.C. 78s(b)(2)(B).
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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 email to rule-comments@sec.gov. Please include
File Number SR-NYSE-2013-24 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 Number SR-NYSE-2013-24. This file
number should be included on the subject line if email is used.
To help the Commission process and review your comments more
efficiently, please use only one method. The Commission will post all
comments on the Commission's Internet 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 Web site
viewing and printing in the Commission's Public Reference Room on
official business days between the hours of 10:00 a.m. and 3:00 p.m.
Copies of such filing also will be available for inspection and copying
at the principal offices of NYSE. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-NYSE-2013-24, and should be submitted on or before May
1, 2013.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\31\
Kevin M. O'Neill,
Deputy Secretary.
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\31\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2013-08324 Filed 4-9-13; 8:45 am]
BILLING CODE 8011-01-P
