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, 21469-21475 [2013-08326]

Download as PDF Federal Register / Vol. 78, No. 69 / Wednesday, April 10, 2013 / Notices 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. VerDate Mar<15>2010 17:59 Apr 09, 2013 Jkt 229001 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). PO 00000 Frm 00132 Fmt 4703 Sfmt 4703 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 E:\FR\FM\10APN1.SGM 10APN1 21470 Federal Register / Vol. 78, No. 69 / Wednesday, April 10, 2013 / Notices 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 MKT Trades and NYSE MKT Realtime Reference Prices (‘‘NYSE MKT 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 MKT Trades and NYSE MKT RRP market data products. TKELLEY on DSK3SPTVN1PROD with NOTICES Background Current NYSE MKT Trades Basic and Broadcast Fees In 2010, the Securities and Exchange Commission (‘‘SEC’’ or the ‘‘Commission’’) approved the NYSE MKT Trades data feed and certain fees for it.4 NYSE MKT Trades is a NYSE MKT-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 MKT 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 includes NYSE MKT’s 4 See Securities Exchange Act Release No. 62187 (May 27, 2010), 75 FR 31500 (June 3, 2010) (SR– NYSEAmex–2010–35). VerDate Mar<15>2010 17:59 Apr 09, 2013 Jkt 229001 opening price, high price, low price, closing price, and cumulative volume for the security. The Exchange currently charges NYSE MKT Trades data feed recipients an access fee of $750 per month, and a subscriber fee for professional subscribers of $10 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 MKT Trades basic fees’’). In July 2012, the Exchange added a fee for distribution by television broadcasters (‘‘Broadcast Fee’’), which is $5,000 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. NYSE MKT 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 MKT RRP is an alternative to delayed prices and is not intended for use in trading decisions.9 As such, distribution of NYSE MKT RRP is subject to certain requirements. Specifically, vendors may not provide NYSE MKT 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 MKT RRP as NYSE MKT-only data, and must provide a hyperlinked notice similar to the one provided for CTA delayed data.10 Current NYSE MKT RRP Fees New Digital Media Offerings The Exchange recently created a new version of NYSE MKT Trades, NYSE MKT 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 MKT 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 MKT Trades product under the basic fees or Broadcast Fee. Vendors may not provide the NYSE MKT 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 MKT-only data, and must provide a hyperlinked notice similar to the one provided for CTA delayed data. The Exchange also will offer NYSE MKT RRP Digital Media so that NYSE MKT RRP will be available for distribution in the same manner as NYSE MKT Trades Digital Media, via television, Web site, and mobile devices. The data elements of NYSE MKT RRP (last sale price, time, and stock summary message) will remain unchanged from today’s NYSE MKT RRP product offering. The Exchange has established these Digital Media products in recognition of The Exchange also offers NYSE MKT RRP.7 NYSE MKT 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 $10,000 per month with no userbased fees for NYSE MKT RRP. For that fee, the vendor may provide NYSE MKT 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 MKT 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 $10,000 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 MKT RRP that are specifically designed for television or mobile device distribution. 5 See id. at 31501. Securities Exchange Act Release No. 67438 (July 13, 2012), 77 FR 42535 (July 19, 2012) (SR– NYSEMKT–2012–19). 7 See Securities Exchange Act Release No. 61403 (Jan. 22, 2010), 75 FR 4598 (Jan. 28, 2010) (SR– NYSEAmex–2009–85). 6 See PO 00000 Frm 00133 Fmt 4703 Sfmt 4703 8 Id. 9 Id. 10 See Securities Exchange Act Release No. 61144 (Dec. 10, 2009), 74 FR 67275, 67276–77 (Dec. 18, 2009) (SR–NYSEAmex–2009–85). 11 See SR–NYSEMKT–2013–30. E:\FR\FM\10APN1.SGM 10APN1 Federal Register / Vol. 78, No. 69 / Wednesday, April 10, 2013 / Notices 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 MKT 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. TKELLEY on DSK3SPTVN1PROD with NOTICES Proposed Digital Media Fees The NYSE MKT Trades Digital Media Enterprise Fee will be $5,000 per month, and the NYSE MKT RRP Digital Media Enterprise Fee will be $2,500 per month. The Exchange notes that the NYSE MKT RRP Digital Media Enterprise Fee is lower than NYSE MKT 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 MKT RRP product and the Broadcast Fee, a vendor paying the Digital Media Enterprise Fee may deliver the NYSE MKT Trades and NYSE MKT 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 MKT Trades, the televisiononly $5,000 Broadcast Fee option will no longer be available. For NYSE MKT RRP, web-only distribution for $10,000 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 MKT RRP Digital Media. The Exchange will continue to offer the $.004 per query fee for NYSE MKT RRP to any vendor that so chooses, but the Exchange proposes to reduce the cap to $2,500, the same amount as the NYSE MKT RRP Digital Media Enterprise Fee. Vendors and subscribers receiving NYSE MKT 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 will continue to pay NYSE MKT Trades basic fees. VerDate Mar<15>2010 17:59 Apr 09, 2013 Jkt 229001 Redistribution Fees The Exchange also proposes to charge a redistribution fee of $750 per month for NYSE MKT Trades and $1,500 per month for NYSE MKT RRP.12 The redistribution fees will apply regardless of whether the customer is eligible for the Digital Media Enterprise Fees or NYSE MKT 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. 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 MKT Trades Digital Media Enterprise Fee of $5,000 per month and NYSE MKT RRP Digital Media Enterprise Fee of $2,500 per month are reasonable because they will offer a means for vendors to more widely distribute NYSE MKT Trades and NYSE MKT RRP data to investors for informational purposes at the same cost (in the case of NYSE MKT Trades) or a lower cost (in the case of NYSE MKT RRP) than is available today. Currently, NYSE MKT Trades can be distributed via television for a $5,000 monthly fee, but that fee does not include Web site or mobile device distribution. NYSE MKT RRP can be distributed over Web sites for a $10,000 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 MKT Trades Digital Media than NYSE MKT RRP Digital Media because the former includes trade 12 A redistributor is a vendor or any other person that provides an NYSE MKT 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). PO 00000 Frm 00134 Fmt 4703 Sfmt 4703 21471 size data. The Exchange believes that the price reduction for NYSE MKT 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 $10,000 to $2,500 is reasonable because it will be equal to the proposed monthly NYSE MKT 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 MKT Trades and NYSE MKT 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 MKT 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 MKT Trades Digital Media data during market-related television programming and on its Web site and allow its E:\FR\FM\10APN1.SGM 10APN1 21472 Federal Register / Vol. 78, No. 69 / Wednesday, April 10, 2013 / Notices TKELLEY on DSK3SPTVN1PROD with NOTICES 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 MKT RRP, reducing prices, the Exchange believes that more vendors will choose to offer NYSE MKT Trades and NYSE MKT 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 the Exchange as well as 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 16 For example, the Exchange and NYSE Arca, Inc. (‘‘NYSE Arca’’) 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). VerDate Mar<15>2010 17:59 Apr 09, 2013 Jkt 229001 with the Commission’s conclusion that ‘‘Congress intended that ‘competitive 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 MKT Trades and NYSE MKT 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. 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). 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 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 17 NetCoalition, 18 Section PO 00000 Frm 00135 Fmt 4703 Sfmt 4703 20 Press Release, U.S. Department of Justice, Assistant Attorney General Christine Varney Holds Conference Call Regarding NASDAQ OMX Group Inc. and IntercontinentalExchange Inc. Abandoning 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– E:\FR\FM\10APN1.SGM 10APN1 Federal Register / Vol. 78, No. 69 / Wednesday, April 10, 2013 / Notices 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 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 Joint Platform TKELLEY on DSK3SPTVN1PROD with NOTICES 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 MKT Trades or NYSE MKT 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. 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.’’). 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. 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. VerDate Mar<15>2010 19:19 Apr 09, 2013 Jkt 229001 PO 00000 Frm 00136 Fmt 4703 Sfmt 4703 21473 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, 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 E:\FR\FM\10APN1.SGM 10APN1 TKELLEY on DSK3SPTVN1PROD with NOTICES 21474 Federal Register / Vol. 78, No. 69 / Wednesday, April 10, 2013 / Notices 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 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 MKT Trades) or a lower price (in the case of NYSE MKT RRP) than is available today, also are lower than the maximum fee for a similar product offered by another exchange24 and lower than the television distribution fee charged by CTA.25 The proposed redistribution fees also are comparable to the Exchange’s and another exchange’s 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 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 VerDate Mar<15>2010 17:59 Apr 09, 2013 Jkt 229001 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 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 either the same or a lower price, may encourage more vendors to choose to offer NYSE MKT Trades or NYSE MKT 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 MKT Trades and NYSE MKT 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. 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. PO 00000 Frm 00137 Fmt 4703 Sfmt 4703 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. 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–NYSEMKT–2013–31 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–NYSEMKT–2013–31. 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 28 15 U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f)(2). 30 15 U.S.C. 78s(b)(2)(B). 29 17 E:\FR\FM\10APN1.SGM 10APN1 Federal Register / Vol. 78, No. 69 / Wednesday, April 10, 2013 / Notices 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–NYSEMKT–2013–31, 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. 2013–08326 Filed 4–9–13; 8:45 am] SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69303; File No. SR– NYSEArca–2013–33] Self-Regulatory Organizations; NYSE Arca, Inc.; Notice of Filing of Proposed Rule Change, as Modified by Amendment No. 1, To List and Trade the International Bear ETF Under NYSE Arca Equities Rule 8.600 TKELLEY on DSK3SPTVN1PROD with NOTICES 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 Arca, Inc. (the ‘‘Exchange’’ or ‘‘NYSE Arca’’) filed with the Securities and Exchange Commission (the ‘‘Commission’’) the proposed rule change as described in Items I and II, below, which Items have been prepared by the self-regulatory 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 VerDate Mar<15>2010 17:59 Apr 09, 2013 Jkt 229001 I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange proposes to list and trade the following under NYSE Arca Equities Rule 8.600 (‘‘Managed Fund Shares’’): International Bear ETF. 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 the Statutory Basis for, the Proposed Rule Change BILLING CODE 8011–01–P 31 17 organization. On April 3, 2013, the Exchange filed Amendment No. 1 to the proposed rule change.4 The Commission is publishing this notice to solicit comments on the proposed rule change, as modified by Amendment No. 1, from interested persons. 1. Purpose The Exchange proposes to list and trade shares (‘‘Shares’’) of the following under NYSE Arca Equities Rule 8.600, which governs the listing and trading of Managed Fund Shares: 5 International 4 In Amendment No. 1, the Exchange made certain technical changes to the proposed rule change, including the substitution of the phrase ‘‘transact in’’ for the word ‘‘purchase’’ in the following sentence on page 5 of this Notice: ‘‘The Fund may transact in equity securities traded in the U.S. on registered exchanges or, in the case of American Depositary Receipts, the over-the-counter market.’’ 5 A Managed Fund Share is a security that represents an interest in an investment company registered under the Investment Company Act of 1940 (15 U.S.C. 80a–1) (‘‘1940 Act’’) organized as an open-end investment company or similar entity that invests in a portfolio of securities selected by its investment adviser consistent with its investment objectives and policies. In contrast, an open-end investment company that issues Investment Company Units, listed and traded on the Exchange under NYSE Arca Equities Rule 5.2(j)(3), seeks to provide investment results that correspond generally to the price and yield performance of a specific foreign or domestic stock index, fixed income securities index or combination thereof. PO 00000 Frm 00138 Fmt 4703 Sfmt 4703 21475 Bear ETF (‘‘Fund’’).6 The Shares will be offered by AdvisorShares Trust (the ‘‘Trust’’), a statutory trust organized under the laws of the State of Delaware and registered with the Securities and Exchange Commission (the ‘‘Commission’’) as an open-end management investment company.7 The investment adviser to the Fund is AdvisorShares Investments, LLC (the ‘‘Adviser’’). The Fund will have a subadviser (‘‘Sub-Adviser’’) that provides day-to-day portfolio management of the Fund. Foreside Fund Services, LLC (the ‘‘Distributor’’) is the principal underwriter and distributor of the Fund’s Shares. The Bank of New York Mellon (the ‘‘Administrator’’) serves as the administrator, custodian, transfer agent and fund accounting agent for the Fund. Commentary .06 to Rule 8.600 provides that, if the investment adviser to the investment company issuing Managed Fund Shares is affiliated with a broker-dealer, such investment adviser shall erect a ‘‘fire wall’’ between the investment adviser and the brokerdealer with respect to access to information concerning the composition and/or changes to such investment company portfolio. In addition, Commentary .06 further requires that personnel who make decisions on the open-end fund’s portfolio composition must be subject to procedures designed to prevent the use and dissemination of material nonpublic information regarding the open-end fund’s portfolio.8 Commentary .06 to Rule 6 The Commission has approved listing and trading on the Exchange of a number of actively managed funds under Rule 8.600. See, e.g., Securities Exchange Act Release Nos. 63076 (October 12, 2010), 75 FR 63874 (October 18, 2010) (SR–NYSEArca–2010–79) (order approving Exchange listing and trading of Cambria Global Tactical ETF); 63802 (January 31, 2011), 76 FR 6503 (February 4, 2011) (SR–NYSEArca–2010–118) (order approving Exchange listing and trading of the SiM Dynamic Allocation Diversified Income ETF and SiM Dynamic Allocation Growth Income ETF); and 65468 (October 3, 2011), 76 FR 62873 (October 11, 2001) [sic] (SR–NYSEArca–2011–51) (order approving Exchange listing and trading of TrimTabs Float Shrink ETF). 7 The Trust is registered under the 1940 Act. On October 19, 2012, the Trust filed with the Commission an amendment to its registration statement on Form N–1A under the Securities Act of 1933 (15 U.S.C. 77a), and under the 1940 Act relating to the Fund (File Nos. 333–157876 and 811–22110) (‘‘Registration Statement’’). The description of the operation of the Trust and the Fund herein is based, in part, on the Registration Statement. In addition, the Commission has issued an order granting certain exemptive relief to the Trust under the 1940 Act. See Investment Company Act Release No. 29291 (May 28, 2010) (File No. 812–13677) (‘‘Exemptive Order’’). 8 An investment adviser to an open-end fund is required to be registered under the Investment Advisers Act of 1940 (the ‘‘Advisers Act’’). As a E:\FR\FM\10APN1.SGM Continued 10APN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 78, Number 69 (Wednesday, April 10, 2013)]
[Notices]
[Pages 21469-21475]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-08326]

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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 self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
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\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.

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[[Page 21470]]

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 MKT
Trades and NYSE MKT Realtime Reference Prices (``NYSE MKT 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 MKT
Trades and NYSE MKT RRP market data products.
Background
Current NYSE MKT Trades Basic and Broadcast Fees
In 2010, the Securities and Exchange Commission (``SEC'' or the
``Commission'') approved the NYSE MKT Trades data feed and certain fees
for it.\4\ NYSE MKT Trades is a NYSE MKT-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 MKT 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
includes NYSE MKT's opening price, high price, low price, closing
price, and cumulative volume for the security.
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\4\ See Securities Exchange Act Release No. 62187 (May 27,
2010), 75 FR 31500 (June 3, 2010) (SR-NYSEAmex-2010-35).
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The Exchange currently charges NYSE MKT Trades data feed recipients
an access fee of $750 per month, and a subscriber fee for professional
subscribers of $10 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 MKT Trades basic fees''). In July 2012, the Exchange
added a fee for distribution by television broadcasters (``Broadcast
Fee''), which is $5,000 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.
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\5\ See id. at 31501.
\6\ See Securities Exchange Act Release No. 67438 (July 13,
2012), 77 FR 42535 (July 19, 2012) (SR-NYSEMKT-2012-19).
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Current NYSE MKT RRP Fees
The Exchange also offers NYSE MKT RRP.\7\ NYSE MKT 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.
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\7\ See Securities Exchange Act Release No. 61403 (Jan. 22,
2010), 75 FR 4598 (Jan. 28, 2010) (SR-NYSEAmex-2009-85).
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The Exchange currently charges a flat fee of $10,000 per month with
no user-based fees for NYSE MKT RRP. For that fee, the vendor may
provide NYSE MKT 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 MKT 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 $10,000 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 MKT RRP that are
specifically designed for television or mobile device distribution.
NYSE MKT 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 MKT RRP is an alternative to
delayed prices and is not intended for use in trading decisions.\9\ As
such, distribution of NYSE MKT RRP is subject to certain requirements.
Specifically, vendors may not provide NYSE MKT 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 MKT RRP as
NYSE MKT-only data, and must provide a hyperlinked notice similar to
the one provided for CTA delayed data.\10\
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\8\ Id.
\9\ Id.
\10\ See Securities Exchange Act Release No. 61144 (Dec. 10,
2009), 74 FR 67275, 67276-77 (Dec. 18, 2009) (SR-NYSEAmex-2009-85).
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New Digital Media Offerings
The Exchange recently created a new version of NYSE MKT Trades,
NYSE MKT 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 MKT 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 MKT Trades product under the basic
fees or Broadcast Fee. Vendors may not provide the NYSE MKT 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 MKT-only data, and
must provide a hyperlinked notice similar to the one provided for CTA
delayed data.
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\11\ See SR-NYSEMKT-2013-30.
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The Exchange also will offer NYSE MKT RRP Digital Media so that
NYSE MKT RRP will be available for distribution in the same manner as
NYSE MKT Trades Digital Media, via television, Web site, and mobile
devices. The data elements of NYSE MKT RRP (last sale price, time, and
stock summary message) will remain unchanged from today's NYSE MKT RRP
product offering.
The Exchange has established these Digital Media products in
recognition of

[[Page 21471]]

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 MKT 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 MKT Trades Digital Media Enterprise Fee will be $5,000 per
month, and the NYSE MKT RRP Digital Media Enterprise Fee will be $2,500
per month. The Exchange notes that the NYSE MKT RRP Digital Media
Enterprise Fee is lower than NYSE MKT 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 MKT RRP product and the Broadcast Fee, a vendor paying the
Digital Media Enterprise Fee may deliver the NYSE MKT Trades and NYSE
MKT 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 MKT Trades, the television-only $5,000 Broadcast Fee
option will no longer be available. For NYSE MKT RRP, web-only
distribution for $10,000 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 MKT RRP
Digital Media.
The Exchange will continue to offer the $.004 per query fee for
NYSE MKT RRP to any vendor that so chooses, but the Exchange proposes
to reduce the cap to $2,500, the same amount as the NYSE MKT RRP
Digital Media Enterprise Fee. Vendors and subscribers receiving NYSE
MKT 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 will
continue to pay NYSE MKT Trades basic fees.
Redistribution Fees
The Exchange also proposes to charge a redistribution fee of $750
per month for NYSE MKT Trades and $1,500 per month for NYSE MKT
RRP.\12\ The redistribution fees will apply regardless of whether the
customer is eligible for the Digital Media Enterprise Fees or NYSE MKT
Trades basic fees.
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\12\ A redistributor is a vendor or any other person that
provides an NYSE MKT data product to a data recipient or to any
system that a data recipient uses, irrespective of the means of
transmission or access.
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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.
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\13\ 15 U.S.C. 78f(b).
\14\ 15 U.S.C. 78f(b)(4), (5).
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The proposed NYSE MKT Trades Digital Media Enterprise Fee of $5,000
per month and NYSE MKT RRP Digital Media Enterprise Fee of $2,500 per
month are reasonable because they will offer a means for vendors to
more widely distribute NYSE MKT Trades and NYSE MKT RRP data to
investors for informational purposes at the same cost (in the case of
NYSE MKT Trades) or a lower cost (in the case of NYSE MKT RRP) than is
available today. Currently, NYSE MKT Trades can be distributed via
television for a $5,000 monthly fee, but that fee does not include Web
site or mobile device distribution. NYSE MKT RRP can be distributed
over Web sites for a $10,000 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 MKT Trades Digital Media than
NYSE MKT RRP Digital Media because the former includes trade size data.
The Exchange believes that the price reduction for NYSE MKT 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
$10,000 to $2,500 is reasonable because it will be equal to the
proposed monthly NYSE MKT 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 MKT Trades and NYSE
MKT 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 MKT 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 MKT Trades
Digital Media data during market-related television programming and on
its Web site and allow its

[[Page 21472]]

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 MKT RRP, reducing prices, the Exchange believes that more
vendors will choose to offer NYSE MKT Trades and NYSE MKT 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 the Exchange as
well as 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.
---------------------------------------------------------------------------

\16\ For example, the Exchange and NYSE Arca, Inc. (``NYSE
Arca'') 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).
---------------------------------------------------------------------------

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 forces should
dictate the services and practices that constitute the U.S. national
market system for trading equity securities.' '' \17\
---------------------------------------------------------------------------

\17\ NetCoalition, 615 F.3d at 535.
---------------------------------------------------------------------------

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 MKT Trades and NYSE MKT 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.
---------------------------------------------------------------------------

\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.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

\19\ See Securities Exchange Act Release No. 63291 (Nov. 9,
2010), 75 FR 70311 (Nov. 17, 2010) (SR-NYSEArca-2010-97).
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

\20\ Press Release, U.S. Department of Justice, Assistant
Attorney General Christine Varney Holds Conference Call Regarding
NASDAQ OMX Group Inc. and IntercontinentalExchange Inc. Abandoning
Their Bid for NYSE Euronext (May 16, 2011), available at https://www.justice.gov/iso/opa/atr/speeches/2011/at-speech-110516.html.
---------------------------------------------------------------------------

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\
---------------------------------------------------------------------------

\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.

---------------------------------------------------------------------------

[[Page 21473]]

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 MKT Trades or NYSE MKT 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 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\
---------------------------------------------------------------------------

\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.'').
---------------------------------------------------------------------------

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, 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

[[Page 21474]]

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 MKT Trades) or a lower price (in the case of
NYSE MKT 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 the Exchange's and another
exchange's similar fees.\26\
---------------------------------------------------------------------------

\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.
---------------------------------------------------------------------------

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 executions to maintain low execution charges for
their users.\27\
---------------------------------------------------------------------------

\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.
---------------------------------------------------------------------------

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 either the same
or a lower price, may encourage more vendors to choose to offer NYSE
MKT Trades or NYSE MKT 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 MKT Trades and NYSE MKT 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.
---------------------------------------------------------------------------

\28\ 15 U.S.C. 78s(b)(3)(A).
\29\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

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.
---------------------------------------------------------------------------

\30\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

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-NYSEMKT-2013-31 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-NYSEMKT-2013-31. 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

[[Page 21475]]

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-NYSEMKT-2013-31, 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\
---------------------------------------------------------------------------

\31\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-08326 Filed 4-9-13; 8:45 am]
BILLING CODE 8011-01-P

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