Self-Regulatory Organizations; NYSE Arca, Inc.; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Fees for the BBO Data Feed for Securities Traded on the CBOE Stock Exchange, 24258-24261 [2013-09627]

Download as PDF tkelley on DSK3SPTVN1PROD with NOTICES 24258 Federal Register / Vol. 78, No. 79 / Wednesday, April 24, 2013 / Notices OCC also believes that risk and volume are relevant factors because they distinctly measure material aspects of clearance and settlement activity and therefore a Clearing Member’s use of OCC’s resources. OCC notes that Clearing Members whose OCC accounts contain positions that are welldiversified and/or exhibit relatively little exposure to overall market direction will likely have a smaller required contribution under the proposed formula. Clearing Members exhibiting a relatively large exposure to market direction, a concentration in contracts that individually present high amounts of risk, and undiversified accounts will generally experience a larger required contribution than is the case under the current formula. OCC notes that most Clearing Member Groups6 will experience a material change (i.e., an increase or decrease of 10% or greater in the dollar amount of a Clearing Member Group’s aggregated Clearing Fund requirement) under the new formula. OCC notes that smaller single firms with lower initial Clearing Fund requirements may experience an increase under the new allocation formula because (i) they may have portfolios lacking the diversification that lowers the risk compared with open interest for larger firms, and (ii) the new formula adds a Clearing Fund share on top of the $150,000 minimum as opposed to instead of it. The Clearing Fund requirements under the new allocation formula will be communicated to Clearing Members with significant lead time to allow Clearing Members to review and prepare for any changes they may experience in their specific Clearing Fund contribution amount. OCC will contact those Clearing Members that will be negatively impacted in a material manner (i.e., an increase of 10% or greater in the dollar amount of a Clearing Member Group’s aggregate Clearing Fund requirement) to confirm such Clearing Members have reviewed the pro forma Clearing Fund requirement numbers and they are ready to meet the new requirement upon implementation. OCC will then begin a two stage phase in process for the new Clearing Fund requirements. The first stage of implementation will occur within 180 calendar days from the date that OCC provides notice to Clearing Members of its intent to implement the new formula. At that stage, open interest, total risk charge, and volume 6 The term ‘‘Clearing Member Group’’ is defined in Article I, Section 1 of OCC’s By-Laws as ‘‘a Clearing Member and any Member Affiliates of such Clearing Member.’’ VerDate Mar<15>2010 18:05 Apr 23, 2013 Jkt 229001 will be applied in the formula with weightings of 75%, 17.5%, and 7.5%, respectively. The second stage of implementation and the final weightings of 50%, 35%, and 15% will then be implemented within 360 days from the same date of the original notice to Clearing Members concerning implementation of the new formula. The proposed rule change will also create a defined term in OCC’s By-Laws, ‘‘Futures-Only Affiliated Clearing Member,’’ to refer to a Clearing Member that is admitted solely for the purpose of clearing transactions in security futures, commodity futures, and/or futures options.7 While the definition is new, there will be no substantive change to Section 2 of Article VIII, under which, if such a Clearing Member is a member affiliate of an earlieradmitted Clearing Member, the Clearing Member’s initial Clearing Fund contribution may be fixed by the Board as an amount that excludes the minimum Clearing Fund component of $150,000, so long as the earlier-admitted Clearing Member already satisfies that requirement. III. Discussion Section 19(b)(2)(C) of the Act 8 directs the Commission to approve a proposed rule change of a self-regulatory organization if it finds that such proposed rule change is consistent with the requirements of the Act and the rules and regulations thereunder applicable to such organization. Section 17A(b)(3)(F) of the Act 9 requires, among other things, that the rules of a clearing agency are designed to promote the prompt and accurate clearance and settlement of securities transactions, and to the extent applicable derivative agreements, contracts, and transactions, to assure the safeguarding of securities and funds which are in the custody or control of the clearing agency or for which it is responsible, and to protect investors and the public interest. Section 17A(b)(3)(D) of the Act 10 requires that the rules of the clearing agency provide for the equitable allocation of reasonable dues, fees, and other charges among its participants. Rule 17Ad–22(b)(2) 11 requires a 7 Article VIII, Section 2 of OCC’s By-Laws actually refers also to ‘‘commodity options,’’ but options directly on an underlying commodity—as opposed to options on futures—are now included in Section 1a(47) of the Commodity Exchange Act to fall within the definition of a ‘‘swap.’’ 7 U.S.C. 1a(47). Since OCC does not currently have rules for the clearing of swaps, the reference to commodity options is being omitted from the new definition. 8 15 U.S.C. 78s(b)(2)(C). 9 15 U.S.C. 78q–1(b)(3)(F). 10 15 U.S.C. 78q–1(b)(3)(D). 11 17 CFR 240.17Ad–22(b)(3). PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 registered clearing agency that performs central counterparty services to establish, implement, maintain, and enforce written policies and procedures reasonably designed to use risk-based models and parameters to set margin requirements and review such margin requirements and the related risk-based models and parameters at least monthly. The proposed rule change accomplishes these purposes by enhancing the Clearing Fund allocation methodology by incorporating measures that OCC believes will apportion contributions based on more sophisticated measurements of Clearing Members’ usage of OCC’s facilities and recognize demands on OCC’s services and facilities that are not captured by the current methodology. IV. Conclusion On the basis of the foregoing, the Commission finds that the proposal is consistent with the requirements of the Act and in particular with the requirements of Section 17A of the Act 12 and the rules and regulations thereunder. It is therefore ordered, pursuant to Section 19(b)(2) of the Act,13 that the proposed rule change (File No. SR– OCC–2013–02) be and hereby is APPROVED.14 For the Commission by the Division of Trading and Markets, pursuant to delegated authority.15 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–09632 Filed 4–23–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69399; File No. SR–CBOE– 2013–039] Self-Regulatory Organizations; NYSE Arca, Inc.; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Fees for the BBO Data Feed for Securities Traded on the CBOE Stock Exchange April 18, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (the 12 15 U.S.C. 78q–1. U.S.C. 78s(b)(2). 14 In approving the proposed rule change, the Commission considered the proposal’s impact on efficiency, competition, and capital formation. 15 U.S.C. 78c(f). 15 17 CFR 200.30–3(a)(12). 13 15 E:\FR\FM\24APN1.SGM 24APN1 Federal Register / Vol. 78, No. 79 / Wednesday, April 24, 2013 / Notices ‘‘Act’’),1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 5, 2013, Chicago Board Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘CBOE’’) 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 Exchange. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change Chicago Board Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘CBOE’’) proposes to amend the fee schedule of Market Data Express, LLC (‘‘MDX’’), an affiliate of CBOE, for the BBO Data Feed (‘‘CBSX BBO Data Feed’’ or ‘‘Data’’) for securities traded on the CBOE Stock Exchange (‘‘CBSX’’). The text of the proposed rule change is available on the Exchange’s Web site (https://www.cboe.com/AboutCBOE/ CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, 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 Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change tkelley on DSK3SPTVN1PROD with NOTICES 1. Purpose The purpose of the proposed rule change is to amend the fees charged by MDX for the CBSX BBO Data Feed and to make a few clarifying changes to the MDX fee schedule.3 CBSX is CBOE’s stock trading facility. 1 U.S.C. 785(b)(1). CFR 240.19b–4. 3 The CBSX BBO Data Feed and the fees charged by MDX for the CBSX BBO Data Feed were established in March 2011. See Securities Exchange Act Release No. 63998 (March 1, 2011), 76 FR 12384 (March 7, 2011). 2 17 VerDate Mar<15>2010 18:05 Apr 23, 2013 Jkt 229001 The CBSX BBO Data Feed is a realtime, low latency data feed that includes CBSX ‘‘BBO data’’ and last sale data.4 CBOE reports CBSX BBO data under the Consolidated Quotation Plan (‘‘CQ Plan’’) and CBSX last sale data under the Consolidated Tape Association Plan (‘‘CTA Plan’’) with respect to NYSElisted securities and securities listed on exchanges other than NYSE and Nasdaq for inclusion in those Plans’ consolidated data streams. CBOE reports CBSX BBO data and CBSX last sale data under the Nasdaq Unlisted Trading Privileges Plan (‘‘Nasdaq/UTP Plan’’) with respect to Nasdaq-listed securities for inclusion in that Plan’s consolidated data stream. The BBO and last sale data contained in the CBSX BBO Data Feed is identical to the data that CBOE sends to the processors under the CQ, CTA and Nasdaq/UTP Plans for redistribution to the public.5 The CBSX BBO Data Feed also includes certain data that is not included in the data sent to the processors under the CQ, CTA and Nasdaq/UTP Plans, namely, totals of customer versus non-customer contracts at the BBO, and All-or-None contingency orders priced better than or equal to the BBO. MDX currently charges Customers a ‘‘direct connect fee’’ of $500 per connection per month and a ‘‘per user fee’’ of $25 per month per ‘‘Authorized User’’ or ‘‘Device’’ for receipt of the CBSX BBO Data Feed by Subscribers.6 Either a CBSX Trading Permit Holder or a non-CBSX Trading Permit Holder may be a Customer. All Customers are assessed the same fees. The Exchange proposes to eliminate both the direct connect fee and the per 4 The CBSX BBO Data Feed includes the ‘‘best bid and offer,’’ or ‘‘BBO’’, consisting of all outstanding quotes and standing orders at the best available price level on each side of the market, with aggregate size (‘‘BBO data,’’ sometimes referred to as ‘‘top-of-book data’’). Data with respect to executed trades is referred to as ‘‘last sale’’ data. 5 The Exchange notes that MDX makes available to Customers the BBO data and last sale data that is included in the CBSX BBO Data Feed no earlier than the time at which the Exchange sends that data to the processors under the CQ, CTA and Nasdaq.UTP Plans. A ‘‘Customer’’ is any entity that receives the CBSX BBO Data Feed directly from MDX’s system and then distributes it either internally or externally to Subscribers. A ‘‘Subscriber’’ is a person (other than an employee of a Customer) that receives the CBSX BBO Data Feed from a Customer for its own internal use. 6 An ‘‘Authorized User’’ is defined as an individual user (an individual human being) who is uniquely identified (by user ID and confidential password or other unambiguous method reasonably acceptable to MDX) and authorized by a Customer to access the CBSX BBO Data Feed supplied by the Customer. A ‘‘Device’’ is defined as any computer, workstation or other item of equipment, fixed or portable, that receives, accesses and/or displays data in visual, audible or other form. PO 00000 Frm 00110 Fmt 4703 Sfmt 4703 24259 user fee and replace them with a ‘‘data fee’’, payable by a Customer, of $500 per month for internal use and external redistribution of the CBSX BBO Data Feed. A ‘‘Customer’’ is any entity that receives the CBSX BBO Data Feed directly from MDX’s system or through a connection to MDX provided by an approved redistributor (i.e., a market data vendor or an extranet service provider) and then distributes it internally and/or externally. The data fee would entitle a Customer to provide the CBSX BBO Data Feed to an unlimited number of internal users and Devices within the Customer. The data fee would also entitle a Customer to distribute externally the CBSX BBO Data Feed to other Customers. A Customer receiving the CBSX BBO Data Feed from another Customer would be assessed the data fee by MDX and would be entitled to distribute the Data internally and/or externally.7 All Customers would have the same rights to utilize the Data (i.e., distribute the Data internally and/or externally) as long as the Customer has entered into an agreement with MDX for the Data and pays the data fee. Either a CBSX Trading Permit Holder or a non-CBSX Trading Permit Holder may be a Customer. The Exchange also proposes to make a few clarifying changes to the MDX fee schedule. The Exchange proposes to create a separate Definitions section on the fee schedule. The Exchange proposes to clarify that MDX will not charge the data fee for any calendar month in which a Customer commences receipt of Data after the 15th day of the month or discontinues receipt of the Data before the 15th day of the month. The Exchange also proposes to include in the MDX fee schedule provisions relating to invoicing and late payments. Lastly, the Exchange proposes to remove the definition of per user fee from the MDX fee schedule consistent with the elimination of that fee. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the requirements of Section 6(b) of the Securities Exchange Act of 1934 (‘‘Act’’) 8 in general, and, in particular, with Section 6(b)(4) of the Act 9 in that it provides for the equitable allocation of reasonable dues, fees and other charges among users and recipients of 7 A Customer may choose to receive the Data from another Customer rather than directly from MDX’s system because it does not want to or is not equipped to manage the technology necessary to establish a direct connection to MDX. 8 15 U.S.C. 78f(b). 9 15 U.S.C. 78f(b)(4). E:\FR\FM\24APN1.SGM 24APN1 24260 Federal Register / Vol. 78, No. 79 / Wednesday, April 24, 2013 / Notices tkelley on DSK3SPTVN1PROD with NOTICES the Data, and with Section 6(b)(5) 10 of the Act in that it is not designed to permit unfair discrimination between them. The Exchange believes the proposed fee is equitable and not unfairly discriminatory because it would apply equally to all Customers. All Customers would have the same rights to utilize the Data (i.e., distribute the Data internally and/or externally) as long as the Customer has entered into an agreement with MDX for the Data and pays the data fee. The Exchange believes the proposed fee is reasonable because it compares favorably to fees that other markets charge for similar products. For example, the Exchange believes Nasdaq charges distributors of its ‘‘Nasdaq Basic’’ data feed a monthly fee of $1,500 per firm for either internal or external distribution or both and charges each professional subscriber a per subscriber monthly charge of $10 for Nasdaq-listed stocks, $5 for NYSE-listed stocks, and $5 for Amex-listed stocks.11 Like the CBSX BBO Data Feed, the Nasdaq Basic data feed includes best bid and offer data and last sale data as well as other market data. The Exchange believes the NYSE charges a monthly fee of $1,500 for the receipt of access to the ‘‘NYSE BBO’’ data feed plus $15 per month per professional subscriber and $5 per month per non-professional subscriber. The NYSE BBO data feed provides best bid and offer information for NYSEtraded securities.12 The Exchange notes that the CBSX BBO Data Feed also competes with products offered by the NYSE entitled NYSE Arca BBO and NYSE MKT BBO that include top-ofbook data and NYSE Arca Trades and NYSE MKT Trades that include last sale data similar to the data in the CBSX BBO Data Feed.13 As noted above, the CBSX BBO Data Feed also includes totals of customer versus non-customer contracts at the BBO, and All-or-None contingency orders priced better than or equal to the BBO. For the reasons cited above, the Exchange believes the proposed fee for the CBSX BBO Data Feed is equitable, reasonable and not unfairly discriminatory. In addition, the Exchange believes that no substantial countervailing basis exists to support a finding that the proposed terms and fee 10 15 U.S.C. 78f(b)(5). Nasdaq Rule 7047 and https:// www.nasdaqtrader.com. The Exchange believes Nasdaq charges each non-professional subscriber to Nasdaq Basic a per subscriber monthly charge of $0.50 for Nasdaq-listed stocks, $0.25 for NYSElisted stocks, and $0.25 for Amex-listed stocks. 12 See https://www.nyxdata.com. 13 Id. 11 See VerDate Mar<15>2010 18:05 Apr 23, 2013 Jkt 229001 for the CBSX BBO Data Feed fails to meet the requirements of the Act. B. Self-Regulatory Organization’s Statement on Burden on Competition CBOE 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. To the contrary, the market for orders and executions is already highly competitive and the Exchange’s proposal is itself pro-competitive as described below. The Exchange believes competition provides an effective constraint on the market data fees that the Exchange, through MDX, has the ability and the incentive to charge. CBSX has a compelling need to attract order flow from market participants in order to maintain its share of trading volume. This compelling need to attract order flow imposes significant pressure on CBOE to act reasonably in setting its fees for market data, particularly given that the market participants that will pay such fees often will be the same market participants from whom CBSX must attract order flow. These market participants include broker-dealers that control the handling of a large volume of customer and proprietary order flow. Given the portability of order flow from one exchange to another, any exchange that sought to charge unreasonably high data fees would risk alienating many of the same customers on whose orders it depends for competitive survival. CBSX competes for order flow with the other national securities exchanges that currently trade equities, with electronic communication networks (‘‘ECNs’’) and with other trading platforms. CBOE is constrained in pricing the CBSX BBO Data Feed by the availability to market participants of alternatives to purchasing the CBSX BBO Data Feed. CBOE must consider the extent to which market participants would choose one or more alternatives instead of purchasing CBSX’s data. For example, the BBO data and last sale data available in the CBSX BBO Data Feed is included in the CQ, CTA and Nasdaq/UTP data feeds. The CQ, CTA and Nasdaq/UTP data feeds are widely distributed and relatively inexpensive, thus constraining CBOE’s ability to price the CBSX BBO Data Feed. In this respect, the CQ, CTA and Nasdaq/UTP data feeds, which include CBSX’s transaction information, are significant alternatives to the CBSX BBO Data Feed. Further, the various self-regulatory organizations, ECNs and the several Trade Reporting Facilities of FINRA that produce proprietary data are sources of potential competition for MDX. As PO 00000 Frm 00111 Fmt 4703 Sfmt 4703 noted above, Nasdaq and NYSE offer market data products that compete with the CBSX BBO Data Feed. In addition, the Exchange believes other exchanges may currently offer top-of-book market data products for a fee or for free. The Exchange believes that the CBSX BBO Data Feed offered by MDX will help attract new users and new order flow to CBSX, thereby improving CBSX’s ability to compete in the market for order flow and executions. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A)(ii) of the Act.14 At any time within 60 days of the filing of the 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 to determine whether the proposed rule 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–CBOE–2013–039 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–CBOE–2013–039. This file 14 15 E:\FR\FM\24APN1.SGM U.S.C. 78s(b)(3)(A)(ii). 24APN1 Federal Register / Vol. 78, No. 79 / Wednesday, April 24, 2013 / Notices 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, 100 F Street NE., Washington, DC 20549, 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 office of the Exchange. All comments received will be posted without change; the Commission does not edit personal identifying information from submissions. You should submit only information that you wish to make publicly available. All submissions should refer to File Number SR–CBOE– 2013–039 and should be submitted on or before May 15, 2013. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.15 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2013–09627 Filed 4–23–13; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–69398; File No. SR–FINRA– 2013–020] Self-Regulatory Organizations; Financial Industry Regulatory Authority, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to FINRA Rule 5250 (Payments for Market Making) tkelley on DSK3SPTVN1PROD with NOTICES April 18, 2013. Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 (‘‘Act’’) 1 and Rule 19b–4 thereunder,2 notice is hereby given that on April 15, 2013, Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’) filed with the 15 17 CFR 200.30–3(a)(12). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. Securities and Exchange Commission (‘‘SEC’’ or ‘‘Commission’’) the proposed rule change as described in Items I, II, and III below, which Items have been prepared by FINRA. FINRA has designated the proposed rule change as constituting a ‘‘non-controversial’’ rule change under paragraph (f)(6) of Rule 19b–4 under the Act,3 which renders the proposal effective upon receipt of this filing by the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change FINRA is proposing to amend FINRA Rule 5250 (Payments for Market Making) to create an exception for payments to members that are expressly provided for under the rules of a national securities exchange. The text of the proposed rule change is available on FINRA’s Web site at https://www.finra.org, at the principal office of FINRA 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, FINRA included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. FINRA has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose FINRA Rule 5250 (Payments for Market Making or ‘‘Rule’’) explicitly prohibits any payment by issuers or issuers’ affiliates and promoters, directly or indirectly, to a member for publishing a quotation, acting as a market maker, or submitting an application in connection therewith. The Rule is intended, among other things, to prohibit members from receiving compensation or other payments from an issuer for quoting or making a market in the issuer’s securities and to assure that members act in an independent capacity when 1 15 VerDate Mar<15>2010 18:05 Apr 23, 2013 3 17 Jkt 229001 PO 00000 CFR 240.19b–4(f)(6). Frm 00112 Fmt 4703 Sfmt 4703 24261 publishing a quotation or making a market in an issuer’s securities. FINRA’s policy concerning payments for market making was first set forth in Notice to Members 75–16 and then codified as NASD Rule 2460 (now FINRA Rule 5250) in 1997.4 Among other things, FINRA recognized that members generally have considerable latitude and freedom to make or terminate market making activities and was concerned that payments by an issuer to a market maker could influence a firm’s decision to make a market. In particular, the existence of undisclosed, private arrangements between market makers and an issuer and/or its promoters may make it difficult for investors to ascertain the true market for the securities, such that what might appear to be independent trading activity may well be illusory.5 FINRA staff has received inquiries regarding the application of the Rule to various types of arrangements provided for by the rules of a national securities exchange (an ‘‘exchange’’). For example, the Commission has approved a rule change by NASDAQ Stock Market implementing a voluntary program for market makers that would be funded through fees by the issuer or an affiliate of the issuer (‘‘NASDAQ MQP’’).6 The Commission also currently is considering a proposed rule change by NYSE Arca to adopt a voluntary market maker program for certain exchangetraded products that would be funded through fees by the issuer.7 FINRA believes certain exchange program structures, such as the one adopted by NASDAQ, could be deemed an indirect payment under Rule 5250; 4 See Notice to Members 75–16 (February 20, 1975) and Securities Exchange Act Release No. 38812 (July 3, 1997), 62 FR 37105 (July 10, 1997) (‘‘Order Approving File No. SR–NASD–97–29’’). 5 ‘‘If payments * * * were permitted, investors would not be able to ascertain which quotations in the marketplace are based on actual interest and which quotations are supported by issuers or promoters. This structure would harm investor confidence in the overall integrity of the marketplace.’’ See Order Approving File No. SR– NASD–97–29 at 37107. 6 See Securities Exchange Act Release No. 69195 (March 20, 2013), 78 FR 18393 (March 26, 2013) (Order Granting Approval of a Proposed Rule Change, as Modified by Amendment Nos. 1 and 3 Thereto, To Establish the Market Quality Program) (File No. SR–NASDAQ–2012–137) (‘‘SEC Approval Order’’). 7 See Securities Exchange Act Release No. 69335 (April 5, 2013), 78 FR 21681 (April 11, 2013) (Notice of Filing of Proposed Rule Change and Amendment No. 1 Thereto To Implement a OneYear Pilot Program for Issuers of Certain ExchangeTraded Products Listed on the Exchange) (File No. SR–NYSEArca–2013–34). This proposal has not been acted upon by the Commission. The Commission has solicited comment on the proposed rule change, which are due by May 2, 2013. E:\FR\FM\24APN1.SGM 24APN1

Agencies

[Federal Register Volume 78, Number 79 (Wednesday, April 24, 2013)]
[Notices]
[Pages 24258-24261]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2013-09627]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-69399; File No. SR-CBOE-2013-039]


Self-Regulatory Organizations; NYSE Arca, Inc.; Chicago Board 
Options Exchange, Incorporated; Notice of Filing and Immediate 
Effectiveness of a Proposed Rule Change Relating to Fees for the BBO 
Data Feed for Securities Traded on the CBOE Stock Exchange

April 18, 2013.
    Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934 
(the

[[Page 24259]]

``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that 
on April 5, 2013, Chicago Board Options Exchange, Incorporated (the 
``Exchange'' or ``CBOE'') 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 
Exchange. The Commission is publishing this notice to solicit comments 
on the proposed rule change from interested persons.
---------------------------------------------------------------------------

    \1\ U.S.C. 785(b)(1).
    \2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------

I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    Chicago Board Options Exchange, Incorporated (the ``Exchange'' or 
``CBOE'') proposes to amend the fee schedule of Market Data Express, 
LLC (``MDX''), an affiliate of CBOE, for the BBO Data Feed (``CBSX BBO 
Data Feed'' or ``Data'') for securities traded on the CBOE Stock 
Exchange (``CBSX''). The text of the proposed rule change is available 
on the Exchange's Web site (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at the Exchange's Office of the 
Secretary, 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 Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
sections A, B, and C below, of the most significant aspects of such 
statements.

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

1. Purpose
    The purpose of the proposed rule change is to amend the fees 
charged by MDX for the CBSX BBO Data Feed and to make a few clarifying 
changes to the MDX fee schedule.\3\ CBSX is CBOE's stock trading 
facility.
---------------------------------------------------------------------------

    \3\ The CBSX BBO Data Feed and the fees charged by MDX for the 
CBSX BBO Data Feed were established in March 2011. See Securities 
Exchange Act Release No. 63998 (March 1, 2011), 76 FR 12384 (March 
7, 2011).
---------------------------------------------------------------------------

    The CBSX BBO Data Feed is a real-time, low latency data feed that 
includes CBSX ``BBO data'' and last sale data.\4\ CBOE reports CBSX BBO 
data under the Consolidated Quotation Plan (``CQ Plan'') and CBSX last 
sale data under the Consolidated Tape Association Plan (``CTA Plan'') 
with respect to NYSE-listed securities and securities listed on 
exchanges other than NYSE and Nasdaq for inclusion in those Plans' 
consolidated data streams. CBOE reports CBSX BBO data and CBSX last 
sale data under the Nasdaq Unlisted Trading Privileges Plan (``Nasdaq/
UTP Plan'') with respect to Nasdaq-listed securities for inclusion in 
that Plan's consolidated data stream. The BBO and last sale data 
contained in the CBSX BBO Data Feed is identical to the data that CBOE 
sends to the processors under the CQ, CTA and Nasdaq/UTP Plans for 
redistribution to the public.\5\
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    \4\ The CBSX BBO Data Feed includes the ``best bid and offer,'' 
or ``BBO'', consisting of all outstanding quotes and standing orders 
at the best available price level on each side of the market, with 
aggregate size (``BBO data,'' sometimes referred to as ``top-of-book 
data''). Data with respect to executed trades is referred to as 
``last sale'' data.
    \5\ The Exchange notes that MDX makes available to Customers the 
BBO data and last sale data that is included in the CBSX BBO Data 
Feed no earlier than the time at which the Exchange sends that data 
to the processors under the CQ, CTA and Nasdaq.UTP Plans. A 
``Customer'' is any entity that receives the CBSX BBO Data Feed 
directly from MDX's system and then distributes it either internally 
or externally to Subscribers. A ``Subscriber'' is a person (other 
than an employee of a Customer) that receives the CBSX BBO Data Feed 
from a Customer for its own internal use.
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    The CBSX BBO Data Feed also includes certain data that is not 
included in the data sent to the processors under the CQ, CTA and 
Nasdaq/UTP Plans, namely, totals of customer versus non-customer 
contracts at the BBO, and All-or-None contingency orders priced better 
than or equal to the BBO.
    MDX currently charges Customers a ``direct connect fee'' of $500 
per connection per month and a ``per user fee'' of $25 per month per 
``Authorized User'' or ``Device'' for receipt of the CBSX BBO Data Feed 
by Subscribers.\6\ Either a CBSX Trading Permit Holder or a non-CBSX 
Trading Permit Holder may be a Customer. All Customers are assessed the 
same fees.
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    \6\ An ``Authorized User'' is defined as an individual user (an 
individual human being) who is uniquely identified (by user ID and 
confidential password or other unambiguous method reasonably 
acceptable to MDX) and authorized by a Customer to access the CBSX 
BBO Data Feed supplied by the Customer. A ``Device'' is defined as 
any computer, workstation or other item of equipment, fixed or 
portable, that receives, accesses and/or displays data in visual, 
audible or other form.
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    The Exchange proposes to eliminate both the direct connect fee and 
the per user fee and replace them with a ``data fee'', payable by a 
Customer, of $500 per month for internal use and external 
redistribution of the CBSX BBO Data Feed. A ``Customer'' is any entity 
that receives the CBSX BBO Data Feed directly from MDX's system or 
through a connection to MDX provided by an approved redistributor 
(i.e., a market data vendor or an extranet service provider) and then 
distributes it internally and/or externally. The data fee would entitle 
a Customer to provide the CBSX BBO Data Feed to an unlimited number of 
internal users and Devices within the Customer. The data fee would also 
entitle a Customer to distribute externally the CBSX BBO Data Feed to 
other Customers. A Customer receiving the CBSX BBO Data Feed from 
another Customer would be assessed the data fee by MDX and would be 
entitled to distribute the Data internally and/or externally.\7\ All 
Customers would have the same rights to utilize the Data (i.e., 
distribute the Data internally and/or externally) as long as the 
Customer has entered into an agreement with MDX for the Data and pays 
the data fee. Either a CBSX Trading Permit Holder or a non-CBSX Trading 
Permit Holder may be a Customer.
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    \7\ A Customer may choose to receive the Data from another 
Customer rather than directly from MDX's system because it does not 
want to or is not equipped to manage the technology necessary to 
establish a direct connection to MDX.
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    The Exchange also proposes to make a few clarifying changes to the 
MDX fee schedule. The Exchange proposes to create a separate 
Definitions section on the fee schedule. The Exchange proposes to 
clarify that MDX will not charge the data fee for any calendar month in 
which a Customer commences receipt of Data after the 15th day of the 
month or discontinues receipt of the Data before the 15th day of the 
month. The Exchange also proposes to include in the MDX fee schedule 
provisions relating to invoicing and late payments. Lastly, the 
Exchange proposes to remove the definition of per user fee from the MDX 
fee schedule consistent with the elimination of that fee.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the requirements of Section 6(b) of the Securities Exchange Act of 
1934 (``Act'') \8\ in general, and, in particular, with Section 6(b)(4) 
of the Act \9\ in that it provides for the equitable allocation of 
reasonable dues, fees and other charges among users and recipients of

[[Page 24260]]

the Data, and with Section 6(b)(5) \10\ of the Act in that it is not 
designed to permit unfair discrimination between them. The Exchange 
believes the proposed fee is equitable and not unfairly discriminatory 
because it would apply equally to all Customers. All Customers would 
have the same rights to utilize the Data (i.e., distribute the Data 
internally and/or externally) as long as the Customer has entered into 
an agreement with MDX for the Data and pays the data fee.
---------------------------------------------------------------------------

    \8\ 15 U.S.C. 78f(b).
    \9\ 15 U.S.C. 78f(b)(4).
    \10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The Exchange believes the proposed fee is reasonable because it 
compares favorably to fees that other markets charge for similar 
products. For example, the Exchange believes Nasdaq charges 
distributors of its ``Nasdaq Basic'' data feed a monthly fee of $1,500 
per firm for either internal or external distribution or both and 
charges each professional subscriber a per subscriber monthly charge of 
$10 for Nasdaq-listed stocks, $5 for NYSE-listed stocks, and $5 for 
Amex-listed stocks.\11\ Like the CBSX BBO Data Feed, the Nasdaq Basic 
data feed includes best bid and offer data and last sale data as well 
as other market data. The Exchange believes the NYSE charges a monthly 
fee of $1,500 for the receipt of access to the ``NYSE BBO'' data feed 
plus $15 per month per professional subscriber and $5 per month per 
non-professional subscriber. The NYSE BBO data feed provides best bid 
and offer information for NYSE-traded securities.\12\ The Exchange 
notes that the CBSX BBO Data Feed also competes with products offered 
by the NYSE entitled NYSE Arca BBO and NYSE MKT BBO that include top-
of-book data and NYSE Arca Trades and NYSE MKT Trades that include last 
sale data similar to the data in the CBSX BBO Data Feed.\13\ As noted 
above, the CBSX BBO Data Feed also includes totals of customer versus 
non-customer contracts at the BBO, and All-or-None contingency orders 
priced better than or equal to the BBO.
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    \11\ See Nasdaq Rule 7047 and https://www.nasdaqtrader.com. The 
Exchange believes Nasdaq charges each non-professional subscriber to 
Nasdaq Basic a per subscriber monthly charge of $0.50 for Nasdaq-
listed stocks, $0.25 for NYSE-listed stocks, and $0.25 for Amex-
listed stocks.
    \12\ See https://www.nyxdata.com.
    \13\ Id.
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    For the reasons cited above, the Exchange believes the proposed fee 
for the CBSX BBO Data Feed is equitable, reasonable and not unfairly 
discriminatory. In addition, the Exchange believes that no substantial 
countervailing basis exists to support a finding that the proposed 
terms and fee for the CBSX BBO Data Feed fails to meet the requirements 
of the Act.

B. Self-Regulatory Organization's Statement on Burden on Competition

    CBOE 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. To the contrary, the market for 
orders and executions is already highly competitive and the Exchange's 
proposal is itself pro-competitive as described below.
    The Exchange believes competition provides an effective constraint 
on the market data fees that the Exchange, through MDX, has the ability 
and the incentive to charge. CBSX has a compelling need to attract 
order flow from market participants in order to maintain its share of 
trading volume. This compelling need to attract order flow imposes 
significant pressure on CBOE to act reasonably in setting its fees for 
market data, particularly given that the market participants that will 
pay such fees often will be the same market participants from whom CBSX 
must attract order flow. These market participants include broker-
dealers that control the handling of a large volume of customer and 
proprietary order flow. Given the portability of order flow from one 
exchange to another, any exchange that sought to charge unreasonably 
high data fees would risk alienating many of the same customers on 
whose orders it depends for competitive survival. CBSX competes for 
order flow with the other national securities exchanges that currently 
trade equities, with electronic communication networks (``ECNs'') and 
with other trading platforms.
    CBOE is constrained in pricing the CBSX BBO Data Feed by the 
availability to market participants of alternatives to purchasing the 
CBSX BBO Data Feed. CBOE must consider the extent to which market 
participants would choose one or more alternatives instead of 
purchasing CBSX's data. For example, the BBO data and last sale data 
available in the CBSX BBO Data Feed is included in the CQ, CTA and 
Nasdaq/UTP data feeds. The CQ, CTA and Nasdaq/UTP data feeds are widely 
distributed and relatively inexpensive, thus constraining CBOE's 
ability to price the CBSX BBO Data Feed. In this respect, the CQ, CTA 
and Nasdaq/UTP data feeds, which include CBSX's transaction 
information, are significant alternatives to the CBSX BBO Data Feed.
    Further, the various self-regulatory organizations, ECNs and the 
several Trade Reporting Facilities of FINRA that produce proprietary 
data are sources of potential competition for MDX. As noted above, 
Nasdaq and NYSE offer market data products that compete with the CBSX 
BBO Data Feed. In addition, the Exchange believes other exchanges may 
currently offer top-of-book market data products for a fee or for free.
    The Exchange believes that the CBSX BBO Data Feed offered by MDX 
will help attract new users and new order flow to CBSX, thereby 
improving CBSX's ability to compete in the market for order flow and 
executions.

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

    The Exchange neither solicited nor received comments on the 
proposed rule change.

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)(ii) of the Act.\14\ At any time within 60 days of the 
filing of the 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 to determine whether the 
proposed rule should be approved or disapproved.
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    \14\ 15 U.S.C. 78s(b)(3)(A)(ii).
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IV. Solicitation of Comments

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

Electronic Comments

     Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
     Send an email to rule-comments@sec.gov. Please include 
File Number SR-CBOE-2013-039 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-CBOE-2013-039. This 
file

[[Page 24261]]

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, 100 F Street NE., 
Washington, DC 20549, 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 office of the Exchange. All 
comments received will be posted without change; the Commission does 
not edit personal identifying information from submissions. You should 
submit only information that you wish to make publicly available. All 
submissions should refer to File Number SR-CBOE-2013-039 and should be 
submitted on or before May 15, 2013.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\15\
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    \15\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2013-09627 Filed 4-23-13; 8:45 am]
BILLING CODE 8011-01-P
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