Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of Filing of Proposed Rule Change To Establish a New Market Data Product Called the BATS One Feed, 44941-44950 [2014-18123]
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Federal Register / Vol. 79, No. 148 / Friday, August 1, 2014 / Notices
II. Date of Effectiveness of the Proposed
Rule Change and Timing for
Commission Action
Because the proposed rule change
does not (i) significantly affect the
protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 22 and Rule 19b–4(f)(6)
thereunder.23
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 rule-comments@
sec.gov. Please include File Number SR–
EDGA–2014–17 on the subject line.
tkelley on DSK3SPTVN1PROD with NOTICES
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–EDGA–2014–17. 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/
22 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the text of the proposed rule
change, at least five business days prior to the date
of filing of the proposed rule change, or such
shorter time as designated by the Commission.
23 17
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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
a.m. and 3 p.m. Copies of the 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
available publicly. All submissions
should refer to File Number SR–EDGA–
2014–17 and should be submitted on or
before August 22, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–18117 Filed 7–31–14; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–72688; File No. SR–BATS–
2014–028]
Self-Regulatory Organizations; BATS
Exchange, Inc.; Notice of Filing of
Proposed Rule Change To Establish a
New Market Data Product Called the
BATS One Feed
July 28, 2014.
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 July 14,
2014, BATS Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BATS’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
below, which Items have been prepared
by the self-regulatory organization. The
Commission is publishing this notice to
PO 00000
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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44941
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to establish a
new market data product called the
BATS One Feed as well as to establish
related market data fees. The text of the
proposed BATS One Feed is attached as
Exhibit 5A. The proposed changes to the
fee schedule are attached as Exhibit 5B.
Exhibits 5A and 5B are available on the
Exchange’s Web site at
www.batstrading.com, at the Exchange’s
principal office and at the Public
Reference Room of the Commission.
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 these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization 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 Exchange proposes to establish a
new market data product called the
BATS One Feed. As described more
fully below, the BATS One Feed is a
data feed that will disseminate, on a
real-time basis, the aggregate best bid
and offer (‘‘BBO’’) of all displayed
orders for securities traded on BATS
and its affiliated exchanges 3
(collectively, the ‘‘BATS Exchanges’’)
and for which the BATS Exchanges
report quotes under the Consolidated
3 The Exchange’s affiliated exchanges are EDGA
Exchange, Inc. (‘‘EDGA’’), EDGX Exchange, Inc.
(‘‘EDGX’’), and BATS Y-Exchange, Inc. (‘‘BYX’’). On
January 23, 2014, BATS Global Markets, Inc.
(‘‘BGMI’’), the former parent company of the
Exchange and BYX, completed its business
combination with Direct Edge Holdings LLC, the
parent company of EDGA and EDGX. See Securities
Exchange Act Release No. 71375 (January 23, 2014),
79 FR 4771 (January 29, 2014) (SR–BATS–2013–
059; SR–BYX–2013–039). Upon completion of the
business combination, DE Holdings and BGMI each
became intermediate holding companies, held
under a single new holding company. The new
holding company, formerly named ‘‘BATS Global
Markets Holdings, Inc.,’’ changed its name to
‘‘BATS Global Markets, Inc.’’ and BGMI changed its
name to ‘‘BATS Global Markets Holdings, Inc.’’
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Tape Association (‘‘CTA’’) Plan or the
Nasdaq/UTP Plan.4 The BATS One Feed
will also contain the individual last sale
information for BATS and each of its
affiliated exchanges. In addition, the
BATS One Feed will contain optional
functionality which will enable
recipients to elect to receive aggregated
two-sided quotations from the BATS
Exchanges for up to five (5) price levels.
The BATS One Feed is designed to
meet the needs of prospective Members
that do not need or are unwilling to pay
for the individual book feeds offered by
each of the individual BATS Exchanges.
In addition, the BATS One Feed offers
market data vendors and purchasers a
suitable alternative to the use of
consolidated data where consolidated
data are not required to be purchased or
displayed. Finally, the proposed new
data feed provides investors with new
options for receiving market data and
competes with similar market data
products offered by NYSE Technologies,
an affiliate of the New York Stock
Exchange, Inc. (‘‘NYSE’’) and the
Nasdaq Stock Market LLC (‘‘Nasdaq’’).5
The provision of new options for
investors to receive market data was a
primary goal of the market data
amendments adopted by Regulation
NMS.6
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Description of the BATS One Feed
The BATS One Feed will contain the
aggregate BBO of the BATS Exchanges
for all securities that are traded on the
BATS Exchanges and for which the
BATS Exchanges report quotes under
the CTA Plan or the Nasdaq/UTP Plan.
The aggregate BBO would include the
total size of all orders at the BBO
available on all BATS Exchanges.7 The
4 The Exchange understands that each of the
BATS Exchanges will separately file substantially
similar proposed rule changes with the Commission
to implement the BATS One Feed and its related
fees.
5 See Nasdaq Basic, https://
www.nasdaqtrader.com/
Trader.aspx?id=nasdaqbasic (last visited May 29,
2014) (data feed offering the BBO and Last Sale
information for all U.S. exchange-listed securities
based on liquidity within the Nasdaq market center,
as well as trades reported to the FINRA/Nasdaq
Trade Reporting Facility (‘‘TRF’’)); Nasdaq NLS
Plus, https://www.nasdaqtrader.com/
Trader.aspx?id=NLSplus (last visited July 8, 2014)
(data feed providing last sale data as well as
consolidated volume from the following Nasdaq
OMX markets for U.S. exchange-listed securities:
Nasdaq, FINRA/Nasdaq TRF, Nasdaq OMX BX, and
Nasdaq OMX PSX); NYSE Technologies Best Book
and Trade (‘‘BQT’’), https://www.nyxdata.com/DataProducts/NYSE-Best-Quote-and-Trades (last visited
May 27, 2014) (data feed providing unified view of
BBO and last sale information for the NYSE, NYSE
Arca, and NYSE MKT).
6 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, at 37503 (June 29,
2005) (Regulation NMS Adopting Release).
7 The Exchange notes that quotations of odd lot
size, which is generally less than 100 shares, are
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BATS One Feed would also disseminate
last sale information for each of the
individual BATS Exchanges
(collectively with the aggregate BBO, the
‘‘BATS One Summary Feed’’). The last
sale information will include the price,
size, time of execution, and individual
BATS Exchange on which the trade was
executed. The last sale message will also
include the cumulative number of
shares executed on all BATS Exchanges
for that trading day. The Exchange will
disseminate the aggregate BBO of the
BATS Exchanges and last sale
information through the BATS One
Feed no earlier than each individual
BATS Exchange provides its BBO and
last sale information to the processors
under the CTA Plan or the Nasdaq/UTP
Plan.
The BATS One Feed would also
consist of Symbol Summary, Market
Status, Retail Liquidity Identifier on
behalf of BYX, Trading Status, and
Trade Break messages. The Symbol
Summary message will include the total
executed volume across all BATS
Exchanges. The Market Status message
is disseminated to reflect a change in
the status of one of the BATS
Exchanges. For example, the Market
Status message will indicate whether
one of the BATS Exchanges is
experiencing a systems issue or
disruption and quotation or trade
information from that market is not
currently being disseminated via the
BATS One Feed as part of the
aggregated BBO. The Market Status
message will also indicate where BATS
Exchange is no longer experiencing a
systems issue or disruption to properly
reflect the status of the aggregated BBO.
The Retail Liquidity Identifier
indicator message will be disseminated
via the BATS One Feed on behalf of
BYX only pursuant to BYX’s Retail Price
Improvement (‘‘RPI’’) Program.8 The
Retail Liquidity Identifier indicates
when RPI interest priced at least $0.001
better than BYX’s Protected Bid or
Protected Offer for a particular security
is available in the System. The
Exchange proposes to disseminate the
Retail Liquidity Indicator via the BATS
One Feed in the same manner as it is
currently disseminated through
consolidated data streams (i.e., pursuant
to the Consolidated Tape Association
Plan/Consolidated Quotation Plan, or
CTA/CQ, for Tape A and Tape B
securities, and the Nasdaq UTP Plan for
Tape C securities) as well as through
proprietary BATS data feeds. The Retail
Liquidity Identifier will reflect the
symbol and the side (buy or sell) of the
RPI interest, but does not include the
price or size of the RPI interest. In
particular, like CQ and UTP quoting
outputs, the BATS One Feed will
include a field for codes related to the
Retail Price Improvement Identifier. The
codes indicate RPI interest that is priced
better than BYX’s Protected Bid or
Protected Offer by at least the minimum
level of price improvement as required
by the Program.
The Trade Break message will
indicate when an execution on a BATS
Exchange is broken in accordance with
the individual BATS Exchange’s rules.9
The Trading Status message will
indicate the current trading status of a
security on each individual BATS
Exchange. For example, a Trading
Status message will be sent when a
short sale price restriction is in effect
pursuant to Rule 201 of Regulation SHO
(‘‘Short Sale Circuit Breaker’’),10 or the
security is subject to a trading halt,
suspension or pause declared by the
listing market. A Trading Status
message will be sent whenever a
security’s trading status changes.
Optional Aggregate Depth of Book.
The BATS One Feed will also contain
optional functionality which will enable
recipients to receive two-sided
quotations from the BATS Exchanges for
five (5) price levels for all securities that
are traded on the BATS Exchanges in
addition to the BATS One Summary
Feed (‘‘BATS One Premium Feed’’). For
each price level on one of the BATS
Exchanges, the BATS One Premium
Feed option of the BATS One Feed will
include a two-sided quote and the
number of shares available to buy and
sell at that particular price level.11
included in the total size of all orders at a particular
price level in the BATS One Feed but are currently
not reported by the BATS Exchanges to the
consolidated tape.
8 For a description of BYX’s RPI Program, see
BYX Rule 11.24. See also Securities Exchange Act
Release No. 68303 (November 27, 2012), 77 FR
71652 (December 3, 2012) (SR–BYX–2012–019)
(Order Granting Approval of Proposed Rule Change,
as Modified by Amendment No. 2, to Adopt a Retail
Price Improvement Program); Securities Exchange
Act Release No. 67734 (August 27, 2012), 77 FR
53242 (August 31, 2012) (SR–BYX–2019–019)
(Notice of Filing of Proposed Rule Change to Adopt
a Retail Price Improvement Program).
The Exchange proposes to amend its
fee schedule to incorporate fees related
to the BATS One Feed. The Exchange
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BATS One Feed Fees
9 See, e.g., Exchange [sic] and EDGA Rule 11.13,
Clearly Erroneous Executions, and BATS and BYX
Rule 11.17, Clearly Erroneous Executions.
10 17 CFR 242.200(g); 17 CFR 242.201
11 Recipients who do not elect to receive the
BATS One Premium Feed will receive the aggregate
BBO of the BATS Exchanges under the BATS
Summary Feed, which, unlike the BATS Premium
Feed, would not delineate the size available at the
BBO on each individual BATS Exchange.
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proposes to charge different fees to
vendors depending on whether the
vendor elects to receive: (i) BATS One
Summary Feed; or (ii) the optional
BATS One Premium Feed. These fees
include the following, each of which are
described in detail below: (i) Distributor
Fees; 12 (ii) Usage Fees for both
Professional and Non-Professional
Users; 13 and (iii) Enterprise Fees.14 The
amount of each fee may differ
depending on whether they use the
BATS One Feed data for internal or
external distribution. Vendors that
distribute the BATS One Feed data both
internally and externally will be subject
to the higher of the two Distribution
Fees.
Definitions. The Exchange also
proposes to include in its fee schedule
the following defined terms that relate
to the BATS One Feed fees.
• ‘‘Distributor’’ will be defined as
‘‘any entity that receives the BATS One
Feed directly from BATS or indirectly
through another entity and then
distributes it internally or externally to
a third party.’’ 15
• ‘‘Internal Distributor’’ will be
defined as a ‘‘Distributor that receives
the BATS One Feed and then distributes
that data to one or more Users within
the Distributor’s own entity.’’ 16
• ‘‘External Distributor’’ will be
defined as a ‘‘Distributor that receives
the BATS One Feed and then distributes
12 The Exchange notes that distribution fees as
well as the distinctions based on external versus
internal distribution have been previously filed
with the Commission by Nasdaq, Nasdaq OMX BX,
and Nasdaq OMX PSX. See Nasdaq Rule 7019(b);
see also Securities Exchange Act Release No. 62876
(September 9, 2010), 75 FR 56624 (September 16,
2010) (SR–PHLX–2010–120); Securities Exchange
Act Release Nos. 62907 (September 14, 2010), 75 FR
57314 (September 20, 2010) (SR–NASDAQ–2010–
110); 59582 (March 16, 2009), 74 FR 12423 (March
24, 2009) (Order approving SR–NASDAQ–2008–
102); Securities Exchange Act Release No. 63442
(December 6, 2010), 75 FR 77029 (December 10,
2010) (SR–BX–2010–081).
13 The Exchange notes that usage fees as well as
the distinctions based on professional and nonprofessional subscribers have been previously filed
with or approved by the Commission by Nasdaq
and the NYSE. See Securities Exchange Act Release
Nos. 59582 (March 16, 2009), 74 FR 12423 (March
24, 2009) (Order approving SR–NASDAQ–2008–
102).
14 The Exchange notes that enterprise fees have
been previously filed with or approved by the
Commission by Nasdaq, NYSE and the CTA/CQ
Plans. See Nasdaq Rule 7047. Securities Exchange
Act Release Nos. 71507 (February 7, 2014), 79 FR
8763 (February 13, 2014) (SR–NASDAQ–20140011);
70211 (August 15, 2013), 78 FR 51781 (August 21,
2013) (SR–NYSE–2013–58); 70010 (July 19, 2013)
(File No. SR–CTA/CQ–2013–04).
15 The proposed definition of ‘‘Distributor’’ is
similar to Nasdaq Rule 7047(d)(1).
16 The proposed definition of ‘‘Internal
Distributor’’ is similar to Nasdaq Rule
7047(d)(1)(A).
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that data to one or more Users outside
the Distributor’s own entity.’’ 17
• ‘‘User’’ will be defined as a ‘‘natural
person, a proprietorship, corporation,
partnership, or entity, or device
(computer or other automated service),
that is entitled to receive Exchange
data.’’
• ‘‘Non-Professional User’’ will be
defined as ‘‘a natural person who is not:
(i) Registered or qualified in any
capacity with the Commission, the
Commodity Futures Trading
Commission, any state securities
agency, any securities exchange or
association; any commodities or futures
contract market or association; (ii)
engaged as an ‘‘investment adviser’’ as
that term is defined in Section 201(11)
of the Investment Advisers Act of 1940
(whether or not registered or qualified
under that Act); or (iii) employed by a
bank or other organization exempt from
registration under federal or state
securities laws to perform functions that
will require registration or qualification
if such functions were performed for an
organization not so exempt.’’ 18
• ‘‘Professional User’’ will be defined
as ‘‘any User other than a NonProfessional User.’’ 19
Internal Distribution Fees. Each
Internal Distributor that receives only
the BATS One Summary Feed shall pay
an Internal Distributor Fee of $10,000.00
per month. Each Internal Distributor
shall pay an Internal Distributor Fee of
$15,000.00 per month where they elect
to also receive the BATS One Premium
Feed. The Exchange will charge no
usage fees for BATS One Feed where the
data is received and subsequently
internally distributed to Professional or
Non-Professional Users.
External Distribution Fees. The
Exchange proposes to charge those firms
that distribute the BATS One Feed
externally an External Distributor Fee of
$2,500.00 per month for the BATS One
Summary Feed. Each External
Distributor shall pay an External
Distributor Fee of $5,000.00 per month
where they elect to also receive the
BATS One Premium Feed. The
Exchange also proposes to establish a
New External Distributor Credit under
which new External Distributors will
not be charged a Distributor Fee for their
first three (3) months in order to allow
them to enlist new Users to receive the
BATS One Feed.
In addition to Internal and External
Distribution Fees, the Exchange also
17 The proposed definition of ‘‘External
Distributor’’ is similar to Nasdaq Rule 7047(d)(1)(B).
18 The proposed definition of ‘‘Professional User’’
is similar to Nasdaq Rule 7047(d)(3)(A).
19 The proposed definition of ‘‘Non-Professional
User’’ is similar to Nasdaq Rule 7047(d)(3)(B).
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44943
proposes to charge recipient firms who
receive the BATS One Feed from
External Distributors different fees for
both their Professional Users and NonProfessional Users. The Exchange will
assess a monthly fee for Professional
Users of $10.00 per user for receipt of
the BATS One Summary Feed or $15.00
per user who elect to also receive the
BATS One Premium Feed. NonProfessional Users will be assessed a
monthly fee of $0.25 per user for the
BATS One Summary Feed or $0.50 per
user where they elects to also receive
the BATS One Premium Feed.
External Distributors must count
every Professional User and NonProfessional User to which they provide
BATS One Feed data. Thus, the
Distributor’s count will include every
person and device that accesses the data
regardless of the purpose for which the
individual or device uses the data.20
Distributors must report all Professional
and Non-Professional Users in
accordance with the following:
• In connection with an External
Distributor’s distribution of the BATS
One Feed, the Distributor should count
as one User each unique User that the
Distributor has entitled to have access to
the BATS One Feed. However, where a
device is dedicated specifically to a
single individual, the Distributor should
count only the individual and need not
count the device.
• The External Distributor should
identify and report each unique User. If
a User uses the same unique method to
gain access to the BATS One Feed, the
Distributor should count that as one
User. However, if a unique User uses
multiple methods to gain access to the
BATS One Feed (e.g., a single User has
multiple passwords and user
identifications), the External Distributor
should report all of those methods as an
individual User.
• External Distributors should report
each unique individual person who
receives access through multiple
devices as one User so long as each
device is dedicated specifically to that
individual.
• If an External Distributor entitles
one or more individuals to use the same
device, the External Distributor should
20 Requiring that every person or device to which
they provide the data is counted by the Distributor
receiving the BATS One Feed is similar to the
NYSE Unit-of-Count Policy. The only difference is
that the NYSE Unit-of-Count Policy requires the
counting of users receiving a market data product
through both internal and external distribution.
Because the Exchange proposes to charge Usage
Fees solely to recipient firms whose Users receive
data from an external distributor and not through
internal distribution, it only requires the counting
of Users by Distributors that disseminate the BATS
One Feed externally.
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include only the individuals, and not
the device, in the count.
Each External Distributor will receive
a credit against its monthly Distributor
Fee for the BATS One Feed equal to the
amount of its monthly Usage Fees up to
a maximum of the Distributor Fee for
the BATS One Feed. For example, an
External Distributor will be subject to a
$5,000.00 monthly Distributor Fee
where they elect to receive the BATS
One Premium Feed. If that External
Distributor reports User quantities
totaling $5,000.00 or more of monthly
usage of the BATS One Premium Feed,
it will pay no net Distributor Fee,
whereas if that same External
Distributor were to report User
quantities totaling $4,000.00 of monthly
usage, it will pay a net of $1,000 for the
Distributor Fee.
Enterprise Fee. The Exchange also
proposes to establish a $50,000.00 per
month Enterprise Fee that will permit a
recipient firm who receives the BATS
Summary Feed portion of the BATS One
Feed from an external distributor to
receive the data for an unlimited
number of Professional and NonProfessional Users and $100,000.00 per
month for recipient firms who elect to
also receive the BATS One Premium
Feed. For example, if a recipient firm
had 15,000 Professional Subscribers
who each receive the BATS One
Summary Feed portion of the BATS One
Feed at $10.00 per month, then that
recipient firm will pay $150,000.00 per
month in Professional Subscriber fees.
Under the proposed Enterprise Fee, the
recipient firm will pay a flat fee of
$50,000.00 for an unlimited number of
Professional and Non-Professional Users
for the BATS Summary Feed portion of
the BATS One Feed. A recipient firm
must pay a separate Enterprise Fee for
each External Distributor that controls
display of the BATS One Feed if it
wishes such Subscriber to be covered by
an Enterprise Fee rather than by perSubscriber fees. A Subscriber that pays
the Enterprise Fee will not have to
report the number of such Subscribers
on a monthly basis. However, every six
months, a Subscriber must provide the
Exchange with a count of the total
number of natural person users of each
product, including both Professional
and Non-Professional Users.
Implementation Date
The Exchange will announce the
effective date of the proposed rule
change in a Trading Notice to be
published as soon as practicable
following approval of the proposed rule
change by the Commission. The
Exchange anticipates making available
the BATS One Feed for evaluation as
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soon as practicable after approval of the
proposed rule change by the
Commission.
2. Statutory Basis
The BATS One Feed
The Exchange believes that the
proposed BATS One Feed is consistent
with Section 6(b) of the Act,21 in
general, and furthers the objectives of
Section 6(b)(5) of the Act,22 in
particular, in that it is designed to
prevent fraudulent and manipulative
acts and practices, to promote just and
equitable principles of trade, to remove
impediments to and perfect the
mechanism of a free and open market
and a national market system, and to
protect investors and the public interest,
and that it is not designed to permit
unfair discrimination among customers,
brokers, or dealers. This proposal is in
keeping with those principles in that it
promotes increased transparency
through the dissemination of the BATS
One Feed. The Exchange also believes
this proposal is consistent with Section
6(b)(5) of the Act because it protects
investors and the public interest and
promotes just and equitable principles
of trade by providing investors with
new options for receiving market data as
requested by market data vendors and
purchasers that expressed an interest in
exchange-only data for instances where
consolidated data is no longer required
to be purchased and displayed. The
proposed rule change would benefit
investors by facilitating their prompt
access to real-time last sale information
and best-bid-and-offer information
contained in the BATS One Feed.
The Exchange also believes that the
proposed rule change is consistent with
Section 11(A) of the Act 23 in that it
supports (i) fair competition among
brokers and dealers, among exchange
markets, and between exchange markets
and markets other than exchange
markets and (ii) the availability to
brokers, dealers, and investors of
information with respect to quotations
for and transactions in securities.
Furthermore, the proposed rule change
is consistent with Rule 603 of
Regulation NMS,24 which provides that
any national securities exchange that
distributes information with respect to
quotations for or transactions in an NMS
stock do so on terms that are not
unreasonably discriminatory.
In adopting Regulation NMS, the
Commission granted self-regulatory
organizations and broker-dealers
PO 00000
U.S.C. 78f.
22 15 U.S.C. 78f(b)(5).
23 15 U.S.C. 78k–1.
24 See 17 CFR 242.603.
Fmt 4703
[E]fficiency is promoted when brokerdealers who do not need the data beyond the
prices, sizes, market center identifications of
the NBBO and consolidated last sale
information are not required to receive (and
pay for) such data. The Commission also
believes that efficiency is promoted when
broker-dealers may choose to receive (and
pay for) additional market data based on their
own internal analysis of the need for such
data.25
By removing ‘‘unnecessary regulatory
restrictions’’ on the ability of exchanges
to sell their own data, Regulation NMS
advanced the goals of the Act and the
principles reflected in its legislative
history.
If the free market should determine
whether proprietary data is sold to
broker-dealers at all, it follows that the
price at which such data is sold should
be set by the market as well. The BATS
One Feed is precisely the sort of market
data product that the Commission
envisioned when it adopted Regulation
NMS.
The BATS One Feed would be
distributed and purchased on a
voluntary basis, in that neither the
BATS Exchanges nor market data
distributors are required by any rule or
regulation to make this data available.
Accordingly, distributors and users can
discontinue use at any time and for any
reason, including due to an assessment
of the reasonableness of fees charged.
BATS One Feed Fees
The Exchange also believes that the
proposed fees for the BATS One Feed
are consistent with Section 6(b) of the
Act,26 in general, and Section 6(b)(4) of
the Act,27 in particular, in that it [sic]
they provide for an equitable allocation
of reasonable fees among users and
recipients of the data and are not
25 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005) (File
No. S7–10–04).
26 15 U.S.C. 78f.
27 15 U.S.C. 78f(b)(4).
21 15
Frm 00207
increased authority and flexibility to
offer new and unique market data to
consumers of such data. It was believed
that this authority would expand the
amount of data available to users and
consumers of such data and also spur
innovation and competition for the
provision of market data. The Exchange
believes that the data products proposed
herein are precisely the sort of market
data products that the Commission
envisioned when it adopted Regulation
NMS. The Commission concluded that
Regulation NMS—by lessening
regulation of the market in proprietary
data—would itself further the Act’s
goals of facilitating efficiency and
competition:
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Federal Register / Vol. 79, No. 148 / Friday, August 1, 2014 / Notices
designed to permit unfair
discrimination among customers,
brokers, or dealers. In adopting
Regulation NMS, the Commission
granted self-regulatory organizations
and broker-dealers increased authority
and flexibility to offer new and unique
market data to the public. It was
believed that this authority would
expand the amount of data available to
consumers, and also spur innovation
and competition for the provision of
market data.
The Exchange also notes that products
described herein are entirely optional.
Firms are not required to purchase the
BATS One Feed. Firms have a wide
variety of alternative market data
products from which to choose.
Moreover, the Exchange is not required
to make these proprietary data products
available or to offer any specific pricing
alternatives to any customers. 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 reliance by
the Securities and Exchange
Commission (‘‘Commission’’) upon the
existence of market forces to set
reasonable and equitably allocated fees
for proprietary market data:
tkelley on DSK3SPTVN1PROD with NOTICES
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.’ 28
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.’ ’’ 29
The 2010 Dodd-Frank amendments to
the Exchange Act reinforce the court’s
conclusions about congressional intent.
On July 21, 2010, President Barack
Obama signed into law H.R. 4173, the
Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010
(‘‘Dodd-Frank Act’’), which amended
Section 19 of the Act. Among other
things, Section 916 of the Dodd-Frank
Act amended paragraph (A) of Section
19(b)(3) of the Act by inserting the
phrase ‘‘on any person, whether or not
the person is a member of the selfregulatory organization’’ after ‘‘due, fee
or other charge imposed by the selfregulatory organization.’’ As a result, all
SRO rule proposals establishing or
28 Id.
at 535 (quoting H.R. Rep. No. 94–229 at 92
(1975), as reprinted in 1975 U.S.C.C.A.N. 323).
29 Id.
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changing dues, fees, or other charges are
immediately effective upon filing
regardless of whether such dues, fees, or
other charges are imposed on members
of the SRO, non-members, or both.
Section 916 further amended paragraph
(C) of Section 19(b)(3) of the Exchange
Act to read, in pertinent part, ‘‘At any
time within the 60-day period beginning
on the date of filing of such a proposed
rule change in accordance with the
provisions of paragraph (1) [of Section
19(b)], the Commission summarily may
temporarily suspend the change in the
rules of the self-regulatory organization
made thereby, 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 this title. If the Commission
takes such action, the Commission shall
institute proceedings under paragraph
(2)(B) [of Section 19(b)] to determine
whether the proposed rule should be
approved or disapproved.’’ The court’s
conclusions about Congressional intent
are therefore reinforced by the DoddFrank Act amendments, which create a
presumption that exchange fees,
including market data fees, may take
effect immediately, without prior
Commission approval, and that the
Commission should take action to
suspend a fee change and institute a
proceeding to determine whether the fee
change should be approved or
disapproved only where the
Commission has concerns that the
change may not be consistent with the
Act. 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.30 In addition, the existence of
alternatives to these data products, such
as 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
30 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.
PO 00000
Frm 00208
Fmt 4703
Sfmt 4703
44945
required to undertake a cost-of-service
or ratemaking approach.
User Fees. The Exchange believes that
implementing the Professional and NonProfessional User fees for the BATS One
Feed is reasonable because it will make
the product more affordable and result
in their greater availability to
Professional and Non-Professional
Users. Moreover, introducing a NonProfessional User fee for the BATS One
Feed is reasonable because it provides
an additional method for retail investors
to access the BATS One Feed data and
provides the same data that is available
to Professional Users.
In addition, the proposed fees are
reasonable when compared to fees for
comparable products offered by the
NYSE, Nasdaq, and under the CTA and
CQ Plans. Specifically, Nasdaq offers
Nasdaq Basic, which includes best bid
and offer and last sale data for Nasdaq
and the FINRA/Nasdaq TRF, for a
monthly fee of $26 per professional
subscriber and $1 per non-professional
subscriber; alternatively, a broker-dealer
may purchase an enterprise license at a
rate of $100,000 per month for
distribution to an unlimited number of
non-professional users or $365,000 per
month for up to 16,000 professional
users, plus $2 for each additional
professional user over 16,000.31 The
Exchange notes that Nasdaq Basic also
offers data for Nasdaq OMX BX and
Nasdaq OMX PSX, as described below.
The NYSE offers BQT, which provides
BBO and last sale information for the
NYSE, NYSE Arca, and NYSE MKT, for
a monthly fee of $18 per professional
subscriber and $1 per non-professional
subscriber; alternatively, a broker-dealer
may purchase an enterprise license at a
rate of $365,000 per month for an
unlimited number of professional users.
The NYSE does not offer an enterprise
license for non-professional users.
BATS’s proposed per-user fees are lower
than the NYSE’s and Nasdaq’s fees. In
addition, the Exchange is proposing
Professional and Non-Professional User
fees and Enterprise Fees that are less
than the fees currently charged by the
CTA and CQ Plans. Under the CTA and
CQ Plans, Tape A consolidated last sale
and bid-ask data are offered together for
a monthly fee of $20–$50 per device,
depending on the number of
professional subscribers, and $1.00 per
non-professional subscriber, depending
on the number of non-professional
subscribers.32 A monthly enterprise fee
of $686,400 is available under which a
31 See
Nasdaq Rule 7047.
CTA Plan dated September 9, 2013 and CQ
Plan dated September 9, 2013, available at
https://cta.nyxdata.com/CTA.
32 See
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U.S. registered broker-dealer may
distribute data to an unlimited number
of its own employees and its
nonprofessional subscriber brokerage
account customers. Finally, in contrast
to Nasdaq UTP and the CTA and CQ
Plans, the Exchange also will permit
enterprise distribution by a non-brokerdealer.
Enterprise Fee. The proposed
Enterprise Fee for the BATS One Feed
is reasonable as the fee proposed is less
than the enterprise fees currently
charged for NYSE BQT, Nasdaq Basic,
and consolidated data distributed under
the Nasdaq UTP and the CTA and CQ
Plans. In addition, the Enterprise Fee
could result in a fee reduction for
recipient firms with a large number of
Professional and Non-Professional
Users. If a recipient firm has a smaller
number of Professional Users of the
BATS One Feed, then it may continue
using the per user structure and benefit
from the per user fee reductions. By
reducing prices for recipient firms with
a large number of Professional and NonProfessional Users, the Exchange
believes that more firms may choose to
receive and to distribute the BATS One
Feed, thereby expanding the
distribution of this market data for the
benefit of investors.
The Exchange further believes that the
proposed Enterprise Fee is reasonable
because it will simplify reporting for
certain recipients that have large
numbers of Professional and NonProfessional Users. Firms that pay the
proposed Enterprise Fee will not have to
report the number of Users on a
monthly basis as they currently do, but
rather will only have to count natural
person users every six months, which is
a significant reduction in administrative
burden.
The Exchange believes that the
proposed fees are equitable and not
unfairly discriminatory because they
will be charged uniformly to recipient
firms and Users that select these
products. The fee structure of
differentiated professional and nonprofessional fees has long been used by
other exchanges for their proprietary
data products, and by the Nasdaq UTP
and the CTA and CQ Plans in order to
reduce the price of data to retail
investors and make it more broadly
available.33 Offering the BATS One Feed
to Non-Professional Users with the same
data available to Professional Users
results in greater equity among data
recipients. Finally, the Exchange
33 See, e.g., Securities Exchange Act Release No.
20002, File No. S7–433 (July 22, 1983) (establishing
nonprofessional fees for CTA data); NASDAQ Rules
7023(b), 7047.
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22:09 Jul 31, 2014
Jkt 232001
believes that it is equitable and not
unfairly discriminatory to establish an
Enterprise Fee because it reduces the
Exchange’s costs and the Distributor’s
administrative burdens in tracking and
auditing large numbers of users.
Distribution Fee. The Exchange
believes that the proposed Distribution
Fees are also reasonable, equitably
allocated, and not unreasonably
discriminatory. The fees for Members
and non-Members are uniform except
with respect to reasonable distinctions
with respect to internal and external
distribution.34 The Exchange believes
that the Distribution Fees for the BATS
One Feed are reasonable and fair in light
of alternatives offered by other market
centers. First, although the Internal
Distribution fee is higher than those of
competitor products, there are no usage
fees assessed for Users that receive the
BATS One Feed data through Internal
Distribution, which results in a net cost
that is lower than competitor products
for many data recipients and will be
easier to administer. In addition, for
External Distribution, the Distribution
Fees are similar to or lower than similar
products. For example, under the
Nasdaq UTP and CTA and CQ Plans,
consolidated last sale and bid-ask data
are offered for a combined monthly fee
of $3,000 for redistribution.35 The
Exchange is proposing Distribution Fees
that are less than the fees currently
charged by the Nasdaq UTP and CTA
and CQ Plans.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
An exchange’s ability to price its
proprietary data feed products is
constrained by actual competition for
the sale of proprietary market data
products, the joint product nature of
exchange platforms, and the existence of
alternatives to the Exchange’s
34 The Exchange notes that distinctions based on
external versus internal distribution have been
previously filed with the Commission by Nasdaq,
Nasdaq OMX BX, and Nasdaq OMX PSX. See
Nasdaq Rule 019(b); see also Securities Exchange
Act Release No. 62876 (September 9, 2010), 75 FR
56624 (September 16, 2010) (SR–PHLX–2010–120);
Securities Exchange Act Release No. 62907
(September 14, 2010), 75 FR 57314 (September 20,
2010) (SR–NASDAQ–2010–110); Securities
Exchange Act Release No. 63442 (December 6,
2010), 75 FR 77029 (December 10, 2010) (SR–BX–
2010–081).
35 See CTA Plan dated September 9, 2013 and CQ
Plan dated September 9, 2013, available at https://
cta.nyxdata.com/CTA, Nasdaq UTP fees available at
https://www.nasdaqtrader.com/Trader.aspx?id=DP
PriceListUTP#uf.
PO 00000
Frm 00209
Fmt 4703
Sfmt 4703
proprietary last sale data. Because other
exchanges already offer similar
products,36 the Exchange’s proposed
BATS One Feed will enhance
competition. Specifically, the BATS
One Feed was developed to compete
with similar market data products
offered by Nasdaq and NYSE
Technologies, an affiliate of the NYSE.37
The BATS One Feed will foster
competition by providing an alternative
market data product to those offered by
Nasdaq and the NYSE for less cost, as
described in more detail in Section 3(b)
above. This proposed new data feed
provides investors with new options for
receiving market data, which was a
primary goal of the market data
amendments adopted by Regulation
NMS.38
The proposed BATS One Feed would
enhance competition by offering a
market data product that is designed to
compete directly with similar products
offered by the NYSE and Nasdaq.
Nasdaq Basic is a product that includes
two feeds, QBBO, which provides BBO
information for all U.S. exchange-listed
securities on Nasdaq and NLS Plus,
which provides last sale data as well as
consolidated volume from the following
Nasdaq OMX markets for U.S. exchangelisted securities: Nasdaq, FINRA/Nasdaq
TRF,39 Nasdaq OMX BX, and Nasdaq
OMX PSX.40 Likewise, NYSE BQT
includes BBO and last sale information
for the NYSE, NYSE Arca, and NYSE
MKT.41 As a result, Nasdaq Basic and
NYSE BQT comprise a significant view
of the market on any given day and both
include data from multiple trading
venues. As the BATS Exchanges are
consistently one of the top exchange
operators by market share for U.S.
equities trading, excluding opening and
closing auction volume, the data
included within the BATS One Feed
36 See
supra note 5.
37 Id.
38 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, at 37503 (June 29,
2005) (Regulation NMS Adopting Release).
39 See Nasdaq Basic, https://
www.nasdaqtrader.com/Trader.aspx?id=nasdaq
basic (last visited May 29, 2014) (data feed offering
the BBO and Last Sale information for all U.S.
exchange-listed securities based on liquidity within
the Nasdaq market center, as well as trades reported
to the FINRA/Nasdaq TRF).
40 See Nasdaq NLS Plus, https://www.nasdaq
trader.com/Trader.aspx?id=NLSplus (last visited
July 8, 2014) (data feed providing last sale data as
well as consolidated volume from the following
Nasdaq OMX markets for U.S. exchange-listed
securities: Nasdaq, FINRA/Nasdaq TRF, Nasdaq
OMX BX, and Nasdaq OMX PSX).
41 See NYSE Technologies BQT, https://
www.nyxdata.com/Data-Products/NYSE-BestQuote-and-Trades (last visited May 27, 2014) (data
feed providing unified view of BBO and last sale
information for the NYSE, NYSE Arca, and NYSE
MKT).
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will provide investors with an
alternative to Nasdaq Basic and NYSE
BQT and a new option for obtaining a
broad market view, consistent with the
primary goal of the market data
amendments adopted by Regulation
NMS.42
The BATS One Feed will not only
provide content that is competitive with
the similar products offered by other
exchanges, but will provide pricing that
is competitive as well. As previously
stated, the fees for the BATS One Feed
are significantly lower than alternative
exchange products. The BATS One Feed
is 60% less expensive per professional
user and more than 85% less expensive
for an enterprise license for professional
users (50% less for non-professional
users) when compared to a similar
competitor exchange product, offering
firms a lower cost alternative for similar
content.
As the Exchange considers the
integration of the BATS One Feed into
External Distributor products an
important ingredient to the product’s
success, the Exchange has designed
pricing that enables External
Distributors to spend three months
integrating BATS One Feed data into
their products and to enlist new Users
to receive the BATS One Feed data for
free with no External Distribution
charges. In addition, the Exchange is
providing External Distributors a credit
against their monthly External
Distribution Fee equal to the amount of
its monthly Usage Fees up to the
amount of the External Distribution Fee,
which could result in the External
Distributor paying a discounted or no
External Distribution Fee once the free
three months period has ended. With
the fee incentives in place, External
Distributors may freely choose to
include the BATS One Feed data into
their product thereby increasing
competition with External Distributors
offering similar products, replace
alternative data provided by Nasdaq
Basic or NYSE BQT with the BATS One
Feed data or enhance their product to
include BATS One Feed data along with
data offered by competitors to create a
distributor product that may be more
valuable than the BATS One Feed or
any competitor product alone. As with
any product, the recipients of the data
will determine the value of the data
provided by the exchange directly or
through an External Distributor.
Potential subscribers may opt to
disfavor the BATS One Feed based on
the content provided or the pricing and
42 See
Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496, at 37503 (June 29,
2005) (Regulation NMS Adopting Release).
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may believe that alternatives offer them
better value. Accordingly, the Exchange
does not believe that the proposed
BATS One Feed will impair the ability
of External Distributors or competing
venues to maintain their competitive
standing in the financial markets.
The Exchange believes the BATS One
Feed will further enhance competition
by providing External Distributors with
a data feed that allows them to more
quickly and efficiently integrate into
their existing products. Today,
Distributors subscribe to various market
data products offered by single
exchanges and resell that data, either
separately or in the aggregate, to their
subscribers as part of the their own
market data offerings. Distributors may
incur administrative costs when
consolidating and augmenting the data
to meet their subscriber’s need.
Consequently, many External
Distributors will simply choose to not
take the data because of the effort and
cost required to aggregate data from
separate feeds into their existing
products. Those same Distributors have
expressed interest in the BATS One
Feed so that they may easily incorporate
aggregated or summarized BATS
Exchange data into their own products
without themselves incurring the costs
of the repackaging and aggregating the
data it would receive by subscribing to
each market data product offered by the
individual BATS Exchanges. The
Exchange, therefore, believes that by
providing market data that encompasses
combined data from affiliated
exchanges, the Exchange enables certain
External Distributors with the ability to
compete in the provision of similar
content with other External Distributors,
where they may not have done so
previously if they were required to
subscribe to the depth-of-book feeds
from each individual BATS Exchange.
Although the Exchange considers the
acceptance of the BATS One Feed by
External Distributors as important to the
success of the product, depending on
their needs, External Distributors may
choose not to subscribe to the BATS
One Feed and may rather receive the
BATS Exchange individual market data
products and incorporate them into
their specific market data products. For
example, the BATS Premium Feed
provides depth-of-book information for
up to five price levels while each of the
BATS Exchange’s individual data feeds
offer complete depth-of-book and are
not limited to five price levels.43 Those
43 See EDGA Rule 13.8, EDGX Rule 13.8, BZX
Rule 11.22(a) and (c), and BATS Rule 11.22 (a) and
(c) for a description of the depth of book feeds
offered by each of the BATS Exchanges.
PO 00000
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44947
subscribers who wish to view the
complete depth-of-book from each
individual BATS Exchange may prefer
to subscribe to one or all of individual
BATS Exchange depth-of-book data
feeds instead of the BATS One Feed.
The BATS One Feed simply provides
another option for Distributors to choose
from when selecting a product that
meets their market data needs.
Subscribers who seek a broader market
view but do not need complete depthof-book may select the BATS One Feed
while subscribers that seek the complete
depth-of-book information may
subscribe to the depth-of-book feeds of
each individual BATS Exchanges.
Latency. The BATS One Feed is not
intended to compete with similar
products offered by External
Distributors. Rather, it is intended to
assist External Distributors in
incorporating aggregated and
summarized data from the BATS
Exchanges into their own market data
products that are provided to the end
user. Therefore, Distributors will receive
the data, who will, in turn, make
available BATS One Feed to their end
users, either separately or as
incorporated into the various market
data products they provide. As stated
above, Distributors have expressed a
desire for a product like the BATS One
Feed so that they may easily incorporate
aggregated or summarized BATS
Exchange data into their own products
without themselves incurring the
administrative costs of repackaging and
aggregating the data it would receive by
subscribing to each market data product
offered by the individual BATS
Exchanges.
Notwithstanding the above, the
Exchange believes that External
Distributors may create a product
similar to BATS One Feed based on the
market data products offered by the
individual BATS Exchanges with
minimal latency difference. In order to
create the BATS One Feed, the
Exchange will receive the individual
data feeds from each BATS Exchange
and, in turn, aggregate and summarize
that data to create the BATS One Feed.
This is the same process an External
Distributor would undergo should it
create a market data product similar to
the BATS One Feed to distribute to its
end users. In addition, the servers of
most External Distributors are likely
located in the same facilities as the
Exchange, and, therefore, should receive
the individual data feed from each
BATS Exchange on or about the same
time the Exchange would for it to create
the BATS One Feed. Therefore, the
Exchange believes that it will not incur
any potential latency advantage that
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will result in any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
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 by
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 Intercontinental
Exchange 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.’’ 44
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
44 Press
Release, U.S. Department of Justice,
Assistant Attorney General Christine Varney Holds
Conference Call Regarding Nasdaq OMX Group Inc.
and Intercontinental Exchange 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.
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22:09 Jul 31, 2014
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market participants with varying trading
needs.’’ 45
In addition, in the case of products
that are distributed through market data
vendors, the 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, vendors
will not elect to make available the
products described herein unless their
customers request them, and customers
will not elect to purchase them unless
they can be used for profit-generating
purposes. All of these operate as
constraints on pricing proprietary data
products.
Joint Product Nature of Exchange
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
45 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.
PO 00000
Frm 00211
Fmt 4703
Sfmt 4703
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.46 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.47
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 obtaining the market data
46 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); 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.
47 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 invariable 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.’’).
E:\FR\FM\01AUN1.SGM
01AUN1
tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 79, No. 148 / Friday, August 1, 2014 / Notices
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
eleven 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. As stated
above, broker-dealers currently have
numerous alternative venues for their
order flow, including eleven SRO
markets, as well as internalizing BDs
and various forms of ATSs, including
dark pools and ECNs. Each SRO market
competes to produce transaction reports
via trade executions, and two FINRAregulated Trade Reporting Facilities
(‘‘TRFs’’) compete to attract internalized
transaction reports. Competitive markets
for order flow, executions, and
transaction reports provide pricing
discipline for the inputs of proprietary
data products.
The large number of SROs, TRFs, BDs,
and ATSs that currently produce
proprietary data or are currently capable
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22:09 Jul 31, 2014
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of producing it provides further pricing
discipline for proprietary data products.
Each SRO, TRF, ATS, and BD is
currently permitted to produce
proprietary data products, and many
currently do so or have announced
plans to do so, including NASDAQ,
NYSE, NYSE Amex, and NYSEArca.
Any ATS or BD can combine with any
other ATS, BD, or multiple ATSs or BDs
to produce joint proprietary data
products. Additionally, order routers
and market data vendors can facilitate
single or multiple broker-dealers’
production of proprietary data products.
The potential sources of proprietary
products are virtually limitless. The fact
that proprietary data from ATSs, BDs,
and vendors can by-pass SROs is
significant in two respects. First, nonSROs can compete directly with SROs
for the production and sale of
proprietary data products, as BATS and
Arca did before registering as exchanges
by publishing proprietary book data on
the Internet. Second, because a single
order or transaction report can appear in
an SRO proprietary product, a non-SRO
proprietary product, or both, the data
available in proprietary products is
exponentially greater than the actual
number of orders and transaction
reports that exist in the marketplace.
Retail broker-dealers, such as Schwab
and Fidelity, offer their customers
proprietary data only if it promotes
trading and generates sufficient
commission revenue. Although the
business models may differ, these
vendors’ pricing discipline is the same:
they can simply refuse to purchase any
proprietary data product that fails to
provide sufficient value. The Exchange
and other producers of proprietary data
products must understand and respond
to these varying business models and
pricing disciplines in order to market
proprietary data products successfully.
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,
and TracECN. A proliferation of dark
pools and other ATSs operate profitably
with fragmentary shares of consolidated
market volume.
Regulation NMS, by deregulating the
market for proprietary data, has
increased the contestability of that
market. While broker-dealers have
previously published their proprietary
data individually, Regulation NMS
PO 00000
Frm 00212
Fmt 4703
Sfmt 4703
44949
encourages market data vendors and
broker-dealers to produce proprietary
products cooperatively in a manner
never before possible. Multiple market
data vendors already have the capability
to aggregate data and disseminate it on
a profitable scale, including Bloomberg
and Thomson-Reuters.
Competitive forces constrain the
prices that platforms can charge for noncore market information. A trading
platform cannot generate market
information unless it receives trade
orders. For this reason, a platform can
be expected to use its market data
product as a tool for attracting liquidity
and trading to its exchange.
While, by definition, information that
is proprietary to an exchange cannot be
obtained elsewhere, this does not enable
the owner of such information to
exercise monopoly power over that
`
information vis-a-vis firms with the
need for such information. Even though
market information from one platform
may not be a perfect substitute for
market information from one or more
other platforms, the existence of
alternative sources of information can
be expected to constrain the prices
platforms charge for market data.
Besides the fact that similar
information can be obtained elsewhere,
the feasibility of supra-competitive
pricing is constrained by the traders’
ability to shift their trades elsewhere,
which lowers the activity on the
exchange and thus, in the long run,
reduces the quality of the information
generated by the exchange.
Competition among platforms has
driven the Exchange to improve its
platform data offerings and to cater to
customers’ data needs by proposing the
BATS One Feed. The vigor of
competition for non-core data
information is significant and the
Exchange believes that this proposal
clearly evidences such competition. The
Exchange proposes the BATS One Feed
and pricing model in order to keep pace
with changes in the industry and
evolving customer needs. It is entirely
optional and is geared towards
attracting new customers, as well as
retaining existing customers.
The Exchange has witnessed
competitors creating new products and
innovative pricing in this space over the
course of the past year. In all cases,
firms make decisions on how much and
what types of data to consume on the
basis of the total cost of interacting with
the Exchange or other exchanges. The
explicit data fees are but one factor in
a total platform analysis. Some
competitors have lower transactions fees
and higher data fees, and others are vice
versa. The market for this non-core data
E:\FR\FM\01AUN1.SGM
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44950
Federal Register / Vol. 79, No. 148 / Friday, August 1, 2014 / Notices
information is highly competitive and
continually evolves as products develop
and change.
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 proprietary data from other
sources, ensures that the Exchange
cannot set unreasonable fees, or fees
that are unreasonably discriminatory,
because vendors and subscribers can
elect these alternatives or choose not to
purchase a specific proprietary data
product if its cost is not justified by the
returns that 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
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days of such date (i) as the
Commission may designate if it finds
such longer period to be appropriate
and publishes its reasons for so finding
or (ii) as to which the Exchange
consents, the Commission shall:
(A) By order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
tkelley on DSK3SPTVN1PROD with NOTICES
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:
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
BATS–2014–028 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–BATS–2014–028. 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, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of BATS.
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–BATS–2014–028 and
should be submitted on or before
August 22, 2014.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.48
Kevin M. O’Neill,
Deputy Secretary.
[FR Doc. 2014–18123 Filed 7–31–14; 8:45 am]
BILLING CODE 8011–01–P
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Self-Regulatory Organizations; EDGX
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Clarify for Members
and Non-Members the Use of Certain
Data Feeds for Order Handling and
Execution, Order Routing and
Regulatory Compliance of EDGX
Exchange, Inc.
July 28, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that, on July 15,
2014, EDGX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGX’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I and II
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
The Exchange proposes to clarify for
Members 3 and non-Members the
Exchange’s use of certain data feeds for
order handling and execution, order
routing, and regulatory compliance. The
text of the proposed rule change is
available on the Exchange’s Internet
Web site at www.directedge.com, at the
Exchange’s principal office, and at the
Public Reference Room of the
Commission.
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 these statements may be examined at
the places specified in Item IV below.
The self-regulatory organization has
prepared summaries, set forth in
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 The term ‘‘Member’’ is defined as ‘‘any
registered broker or dealer, or any person associated
with a registered broker or dealer, that has been
admitted to membership in the Exchange. A
Member will have the status of a ‘‘member’’ of the
Exchange as that term is defined in Section 3(a)(3)
of the Act.’’ See Exchange Rule 1.5(n).
2 17
48 17
PO 00000
[Release No. 34–72683; File No. SR–EDGX–
2014–20]
1 15
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
SECURITIES AND EXCHANGE
COMMISSION
CFR 200.30–3(a)(12).
Frm 00213
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01AUN1
]]>Agencies
[Federal Register Volume 79, Number 148 (Friday, August 1, 2014)]
[Notices]
[Pages 44941-44950]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-18123]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-72688; File No. SR-BATS-2014-028]
Self-Regulatory Organizations; BATS Exchange, Inc.; Notice of
Filing of Proposed Rule Change To Establish a New Market Data Product
Called the BATS One Feed
July 28, 2014.
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 July 14, 2014, BATS Exchange, Inc. (the ``Exchange'' or ``BATS'')
filed with the Securities and Exchange Commission (``Commission'') the
proposed rule change as described in Items I and II below, which Items
have been prepared by the self-regulatory organization. The Commission
is publishing this notice to solicit comments on the proposed rule
change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to establish a new market data product called
the BATS One Feed as well as to establish related market data fees. The
text of the proposed BATS One Feed is attached as Exhibit 5A. The
proposed changes to the fee schedule are attached as Exhibit 5B.
Exhibits 5A and 5B are available on the Exchange's Web site at
www.batstrading.com, at the Exchange's principal office and at the
Public Reference Room of the Commission.
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 these statements may be examined at
the places specified in Item IV below. The self-regulatory organization
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 Exchange proposes to establish a new market data product called
the BATS One Feed. As described more fully below, the BATS One Feed is
a data feed that will disseminate, on a real-time basis, the aggregate
best bid and offer (``BBO'') of all displayed orders for securities
traded on BATS and its affiliated exchanges \3\ (collectively, the
``BATS Exchanges'') and for which the BATS Exchanges report quotes
under the Consolidated
[[Page 44942]]
Tape Association (``CTA'') Plan or the Nasdaq/UTP Plan.\4\ The BATS One
Feed will also contain the individual last sale information for BATS
and each of its affiliated exchanges. In addition, the BATS One Feed
will contain optional functionality which will enable recipients to
elect to receive aggregated two-sided quotations from the BATS
Exchanges for up to five (5) price levels.
---------------------------------------------------------------------------
\3\ The Exchange's affiliated exchanges are EDGA Exchange, Inc.
(``EDGA''), EDGX Exchange, Inc. (``EDGX''), and BATS Y-Exchange,
Inc. (``BYX''). On January 23, 2014, BATS Global Markets, Inc.
(``BGMI''), the former parent company of the Exchange and BYX,
completed its business combination with Direct Edge Holdings LLC,
the parent company of EDGA and EDGX. See Securities Exchange Act
Release No. 71375 (January 23, 2014), 79 FR 4771 (January 29, 2014)
(SR-BATS-2013-059; SR-BYX-2013-039). Upon completion of the business
combination, DE Holdings and BGMI each became intermediate holding
companies, held under a single new holding company. The new holding
company, formerly named ``BATS Global Markets Holdings, Inc.,''
changed its name to ``BATS Global Markets, Inc.'' and BGMI changed
its name to ``BATS Global Markets Holdings, Inc.''
\4\ The Exchange understands that each of the BATS Exchanges
will separately file substantially similar proposed rule changes
with the Commission to implement the BATS One Feed and its related
fees.
---------------------------------------------------------------------------
The BATS One Feed is designed to meet the needs of prospective
Members that do not need or are unwilling to pay for the individual
book feeds offered by each of the individual BATS Exchanges. In
addition, the BATS One Feed offers market data vendors and purchasers a
suitable alternative to the use of consolidated data where consolidated
data are not required to be purchased or displayed. Finally, the
proposed new data feed provides investors with new options for
receiving market data and competes with similar market data products
offered by NYSE Technologies, an affiliate of the New York Stock
Exchange, Inc. (``NYSE'') and the Nasdaq Stock Market LLC
(``Nasdaq'').\5\ The provision of new options for investors to receive
market data was a primary goal of the market data amendments adopted by
Regulation NMS.\6\
---------------------------------------------------------------------------
\5\ See Nasdaq Basic, https://www.nasdaqtrader.com/Trader.aspx?id=nasdaqbasic (last visited May 29, 2014) (data feed
offering the BBO and Last Sale information for all U.S. exchange-
listed securities based on liquidity within the Nasdaq market
center, as well as trades reported to the FINRA/Nasdaq Trade
Reporting Facility (``TRF'')); Nasdaq NLS Plus, https://www.nasdaqtrader.com/Trader.aspx?id=NLSplus (last visited July 8,
2014) (data feed providing last sale data as well as consolidated
volume from the following Nasdaq OMX markets for U.S. exchange-
listed securities: Nasdaq, FINRA/Nasdaq TRF, Nasdaq OMX BX, and
Nasdaq OMX PSX); NYSE Technologies Best Book and Trade (``BQT''),
https://www.nyxdata.com/Data-Products/NYSE-Best-Quote-and-Trades
(last visited May 27, 2014) (data feed providing unified view of BBO
and last sale information for the NYSE, NYSE Arca, and NYSE MKT).
\6\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, at 37503 (June 29, 2005) (Regulation NMS
Adopting Release).
---------------------------------------------------------------------------
Description of the BATS One Feed
The BATS One Feed will contain the aggregate BBO of the BATS
Exchanges for all securities that are traded on the BATS Exchanges and
for which the BATS Exchanges report quotes under the CTA Plan or the
Nasdaq/UTP Plan. The aggregate BBO would include the total size of all
orders at the BBO available on all BATS Exchanges.\7\ The BATS One Feed
would also disseminate last sale information for each of the individual
BATS Exchanges (collectively with the aggregate BBO, the ``BATS One
Summary Feed''). The last sale information will include the price,
size, time of execution, and individual BATS Exchange on which the
trade was executed. The last sale message will also include the
cumulative number of shares executed on all BATS Exchanges for that
trading day. The Exchange will disseminate the aggregate BBO of the
BATS Exchanges and last sale information through the BATS One Feed no
earlier than each individual BATS Exchange provides its BBO and last
sale information to the processors under the CTA Plan or the Nasdaq/UTP
Plan.
---------------------------------------------------------------------------
\7\ The Exchange notes that quotations of odd lot size, which is
generally less than 100 shares, are included in the total size of
all orders at a particular price level in the BATS One Feed but are
currently not reported by the BATS Exchanges to the consolidated
tape.
---------------------------------------------------------------------------
The BATS One Feed would also consist of Symbol Summary, Market
Status, Retail Liquidity Identifier on behalf of BYX, Trading Status,
and Trade Break messages. The Symbol Summary message will include the
total executed volume across all BATS Exchanges. The Market Status
message is disseminated to reflect a change in the status of one of the
BATS Exchanges. For example, the Market Status message will indicate
whether one of the BATS Exchanges is experiencing a systems issue or
disruption and quotation or trade information from that market is not
currently being disseminated via the BATS One Feed as part of the
aggregated BBO. The Market Status message will also indicate where BATS
Exchange is no longer experiencing a systems issue or disruption to
properly reflect the status of the aggregated BBO.
The Retail Liquidity Identifier indicator message will be
disseminated via the BATS One Feed on behalf of BYX only pursuant to
BYX's Retail Price Improvement (``RPI'') Program.\8\ The Retail
Liquidity Identifier indicates when RPI interest priced at least $0.001
better than BYX's Protected Bid or Protected Offer for a particular
security is available in the System. The Exchange proposes to
disseminate the Retail Liquidity Indicator via the BATS One Feed in the
same manner as it is currently disseminated through consolidated data
streams (i.e., pursuant to the Consolidated Tape Association Plan/
Consolidated Quotation Plan, or CTA/CQ, for Tape A and Tape B
securities, and the Nasdaq UTP Plan for Tape C securities) as well as
through proprietary BATS data feeds. The Retail Liquidity Identifier
will reflect the symbol and the side (buy or sell) of the RPI interest,
but does not include the price or size of the RPI interest. In
particular, like CQ and UTP quoting outputs, the BATS One Feed will
include a field for codes related to the Retail Price Improvement
Identifier. The codes indicate RPI interest that is priced better than
BYX's Protected Bid or Protected Offer by at least the minimum level of
price improvement as required by the Program.
---------------------------------------------------------------------------
\8\ For a description of BYX's RPI Program, see BYX Rule 11.24.
See also Securities Exchange Act Release No. 68303 (November 27,
2012), 77 FR 71652 (December 3, 2012) (SR-BYX-2012-019) (Order
Granting Approval of Proposed Rule Change, as Modified by Amendment
No. 2, to Adopt a Retail Price Improvement Program); Securities
Exchange Act Release No. 67734 (August 27, 2012), 77 FR 53242
(August 31, 2012) (SR-BYX-2019-019) (Notice of Filing of Proposed
Rule Change to Adopt a Retail Price Improvement Program).
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The Trade Break message will indicate when an execution on a BATS
Exchange is broken in accordance with the individual BATS Exchange's
rules.\9\ The Trading Status message will indicate the current trading
status of a security on each individual BATS Exchange. For example, a
Trading Status message will be sent when a short sale price restriction
is in effect pursuant to Rule 201 of Regulation SHO (``Short Sale
Circuit Breaker''),\10\ or the security is subject to a trading halt,
suspension or pause declared by the listing market. A Trading Status
message will be sent whenever a security's trading status changes.
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\9\ See, e.g., Exchange [sic] and EDGA Rule 11.13, Clearly
Erroneous Executions, and BATS and BYX Rule 11.17, Clearly Erroneous
Executions.
\10\ 17 CFR 242.200(g); 17 CFR 242.201
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Optional Aggregate Depth of Book. The BATS One Feed will also
contain optional functionality which will enable recipients to receive
two-sided quotations from the BATS Exchanges for five (5) price levels
for all securities that are traded on the BATS Exchanges in addition to
the BATS One Summary Feed (``BATS One Premium Feed''). For each price
level on one of the BATS Exchanges, the BATS One Premium Feed option of
the BATS One Feed will include a two-sided quote and the number of
shares available to buy and sell at that particular price level.\11\
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\11\ Recipients who do not elect to receive the BATS One Premium
Feed will receive the aggregate BBO of the BATS Exchanges under the
BATS Summary Feed, which, unlike the BATS Premium Feed, would not
delineate the size available at the BBO on each individual BATS
Exchange.
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BATS One Feed Fees
The Exchange proposes to amend its fee schedule to incorporate fees
related to the BATS One Feed. The Exchange
[[Page 44943]]
proposes to charge different fees to vendors depending on whether the
vendor elects to receive: (i) BATS One Summary Feed; or (ii) the
optional BATS One Premium Feed. These fees include the following, each
of which are described in detail below: (i) Distributor Fees; \12\ (ii)
Usage Fees for both Professional and Non-Professional Users; \13\ and
(iii) Enterprise Fees.\14\ The amount of each fee may differ depending
on whether they use the BATS One Feed data for internal or external
distribution. Vendors that distribute the BATS One Feed data both
internally and externally will be subject to the higher of the two
Distribution Fees.
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\12\ The Exchange notes that distribution fees as well as the
distinctions based on external versus internal distribution have
been previously filed with the Commission by Nasdaq, Nasdaq OMX BX,
and Nasdaq OMX PSX. See Nasdaq Rule 7019(b); see also Securities
Exchange Act Release No. 62876 (September 9, 2010), 75 FR 56624
(September 16, 2010) (SR-PHLX-2010-120); Securities Exchange Act
Release Nos. 62907 (September 14, 2010), 75 FR 57314 (September 20,
2010) (SR-NASDAQ-2010-110); 59582 (March 16, 2009), 74 FR 12423
(March 24, 2009) (Order approving SR-NASDAQ-2008-102); Securities
Exchange Act Release No. 63442 (December 6, 2010), 75 FR 77029
(December 10, 2010) (SR-BX-2010-081).
\13\ The Exchange notes that usage fees as well as the
distinctions based on professional and non-professional subscribers
have been previously filed with or approved by the Commission by
Nasdaq and the NYSE. See Securities Exchange Act Release Nos. 59582
(March 16, 2009), 74 FR 12423 (March 24, 2009) (Order approving SR-
NASDAQ-2008-102).
\14\ The Exchange notes that enterprise fees have been
previously filed with or approved by the Commission by Nasdaq, NYSE
and the CTA/CQ Plans. See Nasdaq Rule 7047. Securities Exchange Act
Release Nos. 71507 (February 7, 2014), 79 FR 8763 (February 13,
2014) (SR-NASDAQ-20140011); 70211 (August 15, 2013), 78 FR 51781
(August 21, 2013) (SR-NYSE-2013-58); 70010 (July 19, 2013) (File No.
SR-CTA/CQ-2013-04).
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Definitions. The Exchange also proposes to include in its fee
schedule the following defined terms that relate to the BATS One Feed
fees.
``Distributor'' will be defined as ``any entity that
receives the BATS One Feed directly from BATS or indirectly through
another entity and then distributes it internally or externally to a
third party.'' \15\
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\15\ The proposed definition of ``Distributor'' is similar to
Nasdaq Rule 7047(d)(1).
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``Internal Distributor'' will be defined as a
``Distributor that receives the BATS One Feed and then distributes that
data to one or more Users within the Distributor's own entity.'' \16\
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\16\ The proposed definition of ``Internal Distributor'' is
similar to Nasdaq Rule 7047(d)(1)(A).
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``External Distributor'' will be defined as a
``Distributor that receives the BATS One Feed and then distributes that
data to one or more Users outside the Distributor's own entity.'' \17\
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\17\ The proposed definition of ``External Distributor'' is
similar to Nasdaq Rule 7047(d)(1)(B).
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``User'' will be defined as a ``natural person, a
proprietorship, corporation, partnership, or entity, or device
(computer or other automated service), that is entitled to receive
Exchange data.''
``Non-Professional User'' will be defined as ``a natural
person who is not: (i) Registered or qualified in any capacity with the
Commission, the Commodity Futures Trading Commission, any state
securities agency, any securities exchange or association; any
commodities or futures contract market or association; (ii) engaged as
an ``investment adviser'' as that term is defined in Section 201(11) of
the Investment Advisers Act of 1940 (whether or not registered or
qualified under that Act); or (iii) employed by a bank or other
organization exempt from registration under federal or state securities
laws to perform functions that will require registration or
qualification if such functions were performed for an organization not
so exempt.'' \18\
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\18\ The proposed definition of ``Professional User'' is similar
to Nasdaq Rule 7047(d)(3)(A).
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``Professional User'' will be defined as ``any User other
than a Non-Professional User.'' \19\
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\19\ The proposed definition of ``Non-Professional User'' is
similar to Nasdaq Rule 7047(d)(3)(B).
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Internal Distribution Fees. Each Internal Distributor that receives
only the BATS One Summary Feed shall pay an Internal Distributor Fee of
$10,000.00 per month. Each Internal Distributor shall pay an Internal
Distributor Fee of $15,000.00 per month where they elect to also
receive the BATS One Premium Feed. The Exchange will charge no usage
fees for BATS One Feed where the data is received and subsequently
internally distributed to Professional or Non-Professional Users.
External Distribution Fees. The Exchange proposes to charge those
firms that distribute the BATS One Feed externally an External
Distributor Fee of $2,500.00 per month for the BATS One Summary Feed.
Each External Distributor shall pay an External Distributor Fee of
$5,000.00 per month where they elect to also receive the BATS One
Premium Feed. The Exchange also proposes to establish a New External
Distributor Credit under which new External Distributors will not be
charged a Distributor Fee for their first three (3) months in order to
allow them to enlist new Users to receive the BATS One Feed.
In addition to Internal and External Distribution Fees, the
Exchange also proposes to charge recipient firms who receive the BATS
One Feed from External Distributors different fees for both their
Professional Users and Non-Professional Users. The Exchange will assess
a monthly fee for Professional Users of $10.00 per user for receipt of
the BATS One Summary Feed or $15.00 per user who elect to also receive
the BATS One Premium Feed. Non-Professional Users will be assessed a
monthly fee of $0.25 per user for the BATS One Summary Feed or $0.50
per user where they elects to also receive the BATS One Premium Feed.
External Distributors must count every Professional User and Non-
Professional User to which they provide BATS One Feed data. Thus, the
Distributor's count will include every person and device that accesses
the data regardless of the purpose for which the individual or device
uses the data.\20\ Distributors must report all Professional and Non-
Professional Users in accordance with the following:
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\20\ Requiring that every person or device to which they provide
the data is counted by the Distributor receiving the BATS One Feed
is similar to the NYSE Unit-of-Count Policy. The only difference is
that the NYSE Unit-of-Count Policy requires the counting of users
receiving a market data product through both internal and external
distribution. Because the Exchange proposes to charge Usage Fees
solely to recipient firms whose Users receive data from an external
distributor and not through internal distribution, it only requires
the counting of Users by Distributors that disseminate the BATS One
Feed externally.
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In connection with an External Distributor's distribution
of the BATS One Feed, the Distributor should count as one User each
unique User that the Distributor has entitled to have access to the
BATS One Feed. However, where a device is dedicated specifically to a
single individual, the Distributor should count only the individual and
need not count the device.
The External Distributor should identify and report each
unique User. If a User uses the same unique method to gain access to
the BATS One Feed, the Distributor should count that as one User.
However, if a unique User uses multiple methods to gain access to the
BATS One Feed (e.g., a single User has multiple passwords and user
identifications), the External Distributor should report all of those
methods as an individual User.
External Distributors should report each unique individual
person who receives access through multiple devices as one User so long
as each device is dedicated specifically to that individual.
If an External Distributor entitles one or more
individuals to use the same device, the External Distributor should
[[Page 44944]]
include only the individuals, and not the device, in the count.
Each External Distributor will receive a credit against its monthly
Distributor Fee for the BATS One Feed equal to the amount of its
monthly Usage Fees up to a maximum of the Distributor Fee for the BATS
One Feed. For example, an External Distributor will be subject to a
$5,000.00 monthly Distributor Fee where they elect to receive the BATS
One Premium Feed. If that External Distributor reports User quantities
totaling $5,000.00 or more of monthly usage of the BATS One Premium
Feed, it will pay no net Distributor Fee, whereas if that same External
Distributor were to report User quantities totaling $4,000.00 of
monthly usage, it will pay a net of $1,000 for the Distributor Fee.
Enterprise Fee. The Exchange also proposes to establish a
$50,000.00 per month Enterprise Fee that will permit a recipient firm
who receives the BATS Summary Feed portion of the BATS One Feed from an
external distributor to receive the data for an unlimited number of
Professional and Non-Professional Users and $100,000.00 per month for
recipient firms who elect to also receive the BATS One Premium Feed.
For example, if a recipient firm had 15,000 Professional Subscribers
who each receive the BATS One Summary Feed portion of the BATS One Feed
at $10.00 per month, then that recipient firm will pay $150,000.00 per
month in Professional Subscriber fees. Under the proposed Enterprise
Fee, the recipient firm will pay a flat fee of $50,000.00 for an
unlimited number of Professional and Non-Professional Users for the
BATS Summary Feed portion of the BATS One Feed. A recipient firm must
pay a separate Enterprise Fee for each External Distributor that
controls display of the BATS One Feed if it wishes such Subscriber to
be covered by an Enterprise Fee rather than by per-Subscriber fees. A
Subscriber that pays the Enterprise Fee will not have to report the
number of such Subscribers on a monthly basis. However, every six
months, a Subscriber must provide the Exchange with a count of the
total number of natural person users of each product, including both
Professional and Non-Professional Users.
Implementation Date
The Exchange will announce the effective date of the proposed rule
change in a Trading Notice to be published as soon as practicable
following approval of the proposed rule change by the Commission. The
Exchange anticipates making available the BATS One Feed for evaluation
as soon as practicable after approval of the proposed rule change by
the Commission.
2. Statutory Basis
The BATS One Feed
The Exchange believes that the proposed BATS One Feed is consistent
with Section 6(b) of the Act,\21\ in general, and furthers the
objectives of Section 6(b)(5) of the Act,\22\ in particular, in that it
is designed to prevent fraudulent and manipulative acts and practices,
to promote just and equitable principles of trade, to remove
impediments to and perfect the mechanism of a free and open market and
a national market system, and to protect investors and the public
interest, and that it is not designed to permit unfair discrimination
among customers, brokers, or dealers. This proposal is in keeping with
those principles in that it promotes increased transparency through the
dissemination of the BATS One Feed. The Exchange also believes this
proposal is consistent with Section 6(b)(5) of the Act because it
protects investors and the public interest and promotes just and
equitable principles of trade by providing investors with new options
for receiving market data as requested by market data vendors and
purchasers that expressed an interest in exchange-only data for
instances where consolidated data is no longer required to be purchased
and displayed. The proposed rule change would benefit investors by
facilitating their prompt access to real-time last sale information and
best-bid-and-offer information contained in the BATS One Feed.
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\21\ 15 U.S.C. 78f.
\22\ 15 U.S.C. 78f(b)(5).
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The Exchange also believes that the proposed rule change is
consistent with Section 11(A) of the Act \23\ in that it supports (i)
fair competition among brokers and dealers, among exchange markets, and
between exchange markets and markets other than exchange markets and
(ii) the availability to brokers, dealers, and investors of information
with respect to quotations for and transactions in securities.
Furthermore, the proposed rule change is consistent with Rule 603 of
Regulation NMS,\24\ which provides that any national securities
exchange that distributes information with respect to quotations for or
transactions in an NMS stock do so on terms that are not unreasonably
discriminatory.
---------------------------------------------------------------------------
\23\ 15 U.S.C. 78k-1.
\24\ See 17 CFR 242.603.
---------------------------------------------------------------------------
In adopting Regulation NMS, the Commission granted self-regulatory
organizations and broker-dealers increased authority and flexibility to
offer new and unique market data to consumers of such data. It was
believed that this authority would expand the amount of data available
to users and consumers of such data and also spur innovation and
competition for the provision of market data. The Exchange believes
that the data products proposed herein are precisely the sort of market
data products that the Commission envisioned when it adopted Regulation
NMS. The Commission concluded that Regulation NMS--by lessening
regulation of the market in proprietary data--would itself further the
Act's goals of facilitating efficiency and competition:
[E]fficiency is promoted when broker-dealers who do not need the
data beyond the prices, sizes, market center identifications of the
NBBO and consolidated last sale information are not required to
receive (and pay for) such data. The Commission also believes that
efficiency is promoted when broker-dealers may choose to receive
(and pay for) additional market data based on their own internal
analysis of the need for such data.\25\x
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\25\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005) (File No. S7-10-04).
By removing ``unnecessary regulatory restrictions'' on the ability
of exchanges to sell their own data, Regulation NMS advanced the goals
of the Act and the principles reflected in its legislative history.
If the free market should determine whether proprietary data is
sold to broker-dealers at all, it follows that the price at which such
data is sold should be set by the market as well. The BATS One Feed is
precisely the sort of market data product that the Commission
envisioned when it adopted Regulation NMS.
The BATS One Feed would be distributed and purchased on a voluntary
basis, in that neither the BATS Exchanges nor market data distributors
are required by any rule or regulation to make this data available.
Accordingly, distributors and users can discontinue use at any time and
for any reason, including due to an assessment of the reasonableness of
fees charged.
BATS One Feed Fees
The Exchange also believes that the proposed fees for the BATS One
Feed are consistent with Section 6(b) of the Act,\26\ in general, and
Section 6(b)(4) of the Act,\27\ in particular, in that it [sic] they
provide for an equitable allocation of reasonable fees among users and
recipients of the data and are not
[[Page 44945]]
designed to permit unfair discrimination among customers, brokers, or
dealers. In adopting Regulation NMS, the Commission granted self-
regulatory organizations and broker-dealers increased authority and
flexibility to offer new and unique market data to the public. It was
believed that this authority would expand the amount of data available
to consumers, and also spur innovation and competition for the
provision of market data.
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\26\ 15 U.S.C. 78f.
\27\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange also notes that products described herein are entirely
optional. Firms are not required to purchase the BATS One Feed. Firms
have a wide variety of alternative market data products from which to
choose. Moreover, the Exchange is not required to make these
proprietary data products available or to offer any specific pricing
alternatives to any customers. 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 reliance by the Securities and
Exchange Commission (``Commission'') upon the existence of market
forces 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.' \28\
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\28\ 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.' '' \29\
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\29\ Id.
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The 2010 Dodd-Frank amendments to the Exchange Act reinforce the
court's conclusions about congressional intent. On July 21, 2010,
President Barack Obama signed into law H.R. 4173, the Dodd-Frank Wall
Street Reform and Consumer Protection Act of 2010 (``Dodd-Frank Act''),
which amended Section 19 of the Act. Among other things, Section 916 of
the Dodd-Frank Act amended paragraph (A) of Section 19(b)(3) of the Act
by inserting the phrase ``on any person, whether or not the person is a
member of the self-regulatory organization'' after ``due, fee or other
charge imposed by the self-regulatory organization.'' As a result, all
SRO rule proposals establishing or changing dues, fees, or other
charges are immediately effective upon filing regardless of whether
such dues, fees, or other charges are imposed on members of the SRO,
non-members, or both. Section 916 further amended paragraph (C) of
Section 19(b)(3) of the Exchange Act to read, in pertinent part, ``At
any time within the 60-day period beginning on the date of filing of
such a proposed rule change in accordance with the provisions of
paragraph (1) [of Section 19(b)], the Commission summarily may
temporarily suspend the change in the rules of the self-regulatory
organization made thereby, 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
this title. If the Commission takes such action, the Commission shall
institute proceedings under paragraph (2)(B) [of Section 19(b)] to
determine whether the proposed rule should be approved or
disapproved.'' The court's conclusions about Congressional intent are
therefore reinforced by the Dodd-Frank Act amendments, which create a
presumption that exchange fees, including market data fees, may take
effect immediately, without prior Commission approval, and that the
Commission should take action to suspend a fee change and institute a
proceeding to determine whether the fee change should be approved or
disapproved only where the Commission has concerns that the change may
not be consistent with the Act. 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.\30\ In addition,
the existence of alternatives to these data products, such as
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.
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\30\ Section 916 of the Dodd-Frank Wall Street Reform and
Consumer Protection Act of 2010 (the ``Dodd-Frank Act'') amended
paragraph (A) of Section 19(b)(3) of the Act, 15 U.S.C. 78s(b)(3),
to make clear that all exchange fees for market data may be filed by
exchanges on an immediately effective basis.
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User Fees. The Exchange believes that implementing the Professional
and Non-Professional User fees for the BATS One Feed is reasonable
because it will make the product more affordable and result in their
greater availability to Professional and Non-Professional Users.
Moreover, introducing a Non-Professional User fee for the BATS One Feed
is reasonable because it provides an additional method for retail
investors to access the BATS One Feed data and provides the same data
that is available to Professional Users.
In addition, the proposed fees are reasonable when compared to fees
for comparable products offered by the NYSE, Nasdaq, and under the CTA
and CQ Plans. Specifically, Nasdaq offers Nasdaq Basic, which includes
best bid and offer and last sale data for Nasdaq and the FINRA/Nasdaq
TRF, for a monthly fee of $26 per professional subscriber and $1 per
non-professional subscriber; alternatively, a broker-dealer may
purchase an enterprise license at a rate of $100,000 per month for
distribution to an unlimited number of non-professional users or
$365,000 per month for up to 16,000 professional users, plus $2 for
each additional professional user over 16,000.\31\ The Exchange notes
that Nasdaq Basic also offers data for Nasdaq OMX BX and Nasdaq OMX
PSX, as described below. The NYSE offers BQT, which provides BBO and
last sale information for the NYSE, NYSE Arca, and NYSE MKT, for a
monthly fee of $18 per professional subscriber and $1 per non-
professional subscriber; alternatively, a broker-dealer may purchase an
enterprise license at a rate of $365,000 per month for an unlimited
number of professional users. The NYSE does not offer an enterprise
license for non-professional users. BATS's proposed per-user fees are
lower than the NYSE's and Nasdaq's fees. In addition, the Exchange is
proposing Professional and Non-Professional User fees and Enterprise
Fees that are less than the fees currently charged by the CTA and CQ
Plans. Under the CTA and CQ Plans, Tape A consolidated last sale and
bid-ask data are offered together for a monthly fee of $20-$50 per
device, depending on the number of professional subscribers, and $1.00
per non-professional subscriber, depending on the number of non-
professional subscribers.\32\ A monthly enterprise fee of $686,400 is
available under which a
[[Page 44946]]
U.S. registered broker-dealer may distribute data to an unlimited
number of its own employees and its nonprofessional subscriber
brokerage account customers. Finally, in contrast to Nasdaq UTP and the
CTA and CQ Plans, the Exchange also will permit enterprise distribution
by a non-broker-dealer.
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\31\ See Nasdaq Rule 7047.
\32\ See CTA Plan dated September 9, 2013 and CQ Plan dated
September 9, 2013, available at https://cta.nyxdata.com/CTA.
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Enterprise Fee. The proposed Enterprise Fee for the BATS One Feed
is reasonable as the fee proposed is less than the enterprise fees
currently charged for NYSE BQT, Nasdaq Basic, and consolidated data
distributed under the Nasdaq UTP and the CTA and CQ Plans. In addition,
the Enterprise Fee could result in a fee reduction for recipient firms
with a large number of Professional and Non-Professional Users. If a
recipient firm has a smaller number of Professional Users of the BATS
One Feed, then it may continue using the per user structure and benefit
from the per user fee reductions. By reducing prices for recipient
firms with a large number of Professional and Non-Professional Users,
the Exchange believes that more firms may choose to receive and to
distribute the BATS One Feed, thereby expanding the distribution of
this market data for the benefit of investors.
The Exchange further believes that the proposed Enterprise Fee is
reasonable because it will simplify reporting for certain recipients
that have large numbers of Professional and Non-Professional Users.
Firms that pay the proposed Enterprise Fee will not have to report the
number of Users on a monthly basis as they currently do, but rather
will only have to count natural person users every six months, which is
a significant reduction in administrative burden.
The Exchange believes that the proposed fees are equitable and not
unfairly discriminatory because they will be charged uniformly to
recipient firms and Users that select these products. The fee structure
of differentiated professional and non-professional fees has long been
used by other exchanges for their proprietary data products, and by the
Nasdaq UTP and the CTA and CQ Plans in order to reduce the price of
data to retail investors and make it more broadly available.\33\
Offering the BATS One Feed to Non-Professional Users with the same data
available to Professional Users results in greater equity among data
recipients. Finally, the Exchange believes that it is equitable and not
unfairly discriminatory to establish an Enterprise Fee because it
reduces the Exchange's costs and the Distributor's administrative
burdens in tracking and auditing large numbers of users.
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\33\ See, e.g., Securities Exchange Act Release No. 20002, File
No. S7-433 (July 22, 1983) (establishing nonprofessional fees for
CTA data); NASDAQ Rules 7023(b), 7047.
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Distribution Fee. The Exchange believes that the proposed
Distribution Fees are also reasonable, equitably allocated, and not
unreasonably discriminatory. The fees for Members and non-Members are
uniform except with respect to reasonable distinctions with respect to
internal and external distribution.\34\ The Exchange believes that the
Distribution Fees for the BATS One Feed are reasonable and fair in
light of alternatives offered by other market centers. First, although
the Internal Distribution fee is higher than those of competitor
products, there are no usage fees assessed for Users that receive the
BATS One Feed data through Internal Distribution, which results in a
net cost that is lower than competitor products for many data
recipients and will be easier to administer. In addition, for External
Distribution, the Distribution Fees are similar to or lower than
similar products. For example, under the Nasdaq UTP and CTA and CQ
Plans, consolidated last sale and bid-ask data are offered for a
combined monthly fee of $3,000 for redistribution.\35\ The Exchange is
proposing Distribution Fees that are less than the fees currently
charged by the Nasdaq UTP and CTA and CQ Plans.
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\34\ The Exchange notes that distinctions based on external
versus internal distribution have been previously filed with the
Commission by Nasdaq, Nasdaq OMX BX, and Nasdaq OMX PSX. See Nasdaq
Rule 019(b); see also Securities Exchange Act Release No. 62876
(September 9, 2010), 75 FR 56624 (September 16, 2010) (SR-PHLX-2010-
120); Securities Exchange Act Release No. 62907 (September 14,
2010), 75 FR 57314 (September 20, 2010) (SR-NASDAQ-2010-110);
Securities Exchange Act Release No. 63442 (December 6, 2010), 75 FR
77029 (December 10, 2010) (SR-BX-2010-081).
\35\ See CTA Plan dated September 9, 2013 and CQ Plan dated
September 9, 2013, available at https://cta.nyxdata.com/CTA, Nasdaq
UTP fees available at https://www.nasdaqtrader.com/Trader.aspx?id=DPPriceListUTP#uf.
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B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended. An
exchange's ability to price its proprietary data feed products is
constrained by actual competition for the sale of proprietary market
data products, the joint product nature of exchange platforms, and the
existence of alternatives to the Exchange's proprietary last sale data.
Because other exchanges already offer similar products,\36\ the
Exchange's proposed BATS One Feed will enhance competition.
Specifically, the BATS One Feed was developed to compete with similar
market data products offered by Nasdaq and NYSE Technologies, an
affiliate of the NYSE.\37\ The BATS One Feed will foster competition by
providing an alternative market data product to those offered by Nasdaq
and the NYSE for less cost, as described in more detail in Section 3(b)
above. This proposed new data feed provides investors with new options
for receiving market data, which was a primary goal of the market data
amendments adopted by Regulation NMS.\38\
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\36\ See supra note 5.
\37\ Id.
\38\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, at 37503 (June 29, 2005) (Regulation NMS
Adopting Release).
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The proposed BATS One Feed would enhance competition by offering a
market data product that is designed to compete directly with similar
products offered by the NYSE and Nasdaq. Nasdaq Basic is a product that
includes two feeds, QBBO, which provides BBO information for all U.S.
exchange-listed securities on Nasdaq and NLS Plus, which provides last
sale data as well as consolidated volume from the following Nasdaq OMX
markets for U.S. exchange-listed securities: Nasdaq, FINRA/Nasdaq
TRF,\39\ Nasdaq OMX BX, and Nasdaq OMX PSX.\40\ Likewise, NYSE BQT
includes BBO and last sale information for the NYSE, NYSE Arca, and
NYSE MKT.\41\ As a result, Nasdaq Basic and NYSE BQT comprise a
significant view of the market on any given day and both include data
from multiple trading venues. As the BATS Exchanges are consistently
one of the top exchange operators by market share for U.S. equities
trading, excluding opening and closing auction volume, the data
included within the BATS One Feed
[[Page 44947]]
will provide investors with an alternative to Nasdaq Basic and NYSE BQT
and a new option for obtaining a broad market view, consistent with the
primary goal of the market data amendments adopted by Regulation
NMS.\42\
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\39\ See Nasdaq Basic, https://www.nasdaqtrader.com/Trader.aspx?id=nasdaqbasic (last visited May 29, 2014) (data feed
offering the BBO and Last Sale information for all U.S. exchange-
listed securities based on liquidity within the Nasdaq market
center, as well as trades reported to the FINRA/Nasdaq TRF).
\40\ See Nasdaq NLS Plus, https://www.nasdaqtrader.com/Trader.aspx?id=NLSplus (last visited July 8, 2014) (data feed
providing last sale data as well as consolidated volume from the
following Nasdaq OMX markets for U.S. exchange-listed securities:
Nasdaq, FINRA/Nasdaq TRF, Nasdaq OMX BX, and Nasdaq OMX PSX).
\41\ See NYSE Technologies BQT, https://www.nyxdata.com/Data-Products/NYSE-Best-Quote-and-Trades (last visited May 27, 2014)
(data feed providing unified view of BBO and last sale information
for the NYSE, NYSE Arca, and NYSE MKT).
\42\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496, at 37503 (June 29, 2005) (Regulation NMS
Adopting Release).
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The BATS One Feed will not only provide content that is competitive
with the similar products offered by other exchanges, but will provide
pricing that is competitive as well. As previously stated, the fees for
the BATS One Feed are significantly lower than alternative exchange
products. The BATS One Feed is 60% less expensive per professional user
and more than 85% less expensive for an enterprise license for
professional users (50% less for non-professional users) when compared
to a similar competitor exchange product, offering firms a lower cost
alternative for similar content.
As the Exchange considers the integration of the BATS One Feed into
External Distributor products an important ingredient to the product's
success, the Exchange has designed pricing that enables External
Distributors to spend three months integrating BATS One Feed data into
their products and to enlist new Users to receive the BATS One Feed
data for free with no External Distribution charges. In addition, the
Exchange is providing External Distributors a credit against their
monthly External Distribution Fee equal to the amount of its monthly
Usage Fees up to the amount of the External Distribution Fee, which
could result in the External Distributor paying a discounted or no
External Distribution Fee once the free three months period has ended.
With the fee incentives in place, External Distributors may freely
choose to include the BATS One Feed data into their product thereby
increasing competition with External Distributors offering similar
products, replace alternative data provided by Nasdaq Basic or NYSE BQT
with the BATS One Feed data or enhance their product to include BATS
One Feed data along with data offered by competitors to create a
distributor product that may be more valuable than the BATS One Feed or
any competitor product alone. As with any product, the recipients of
the data will determine the value of the data provided by the exchange
directly or through an External Distributor. Potential subscribers may
opt to disfavor the BATS One Feed based on the content provided or the
pricing and may believe that alternatives offer them better value.
Accordingly, the Exchange does not believe that the proposed BATS One
Feed will impair the ability of External Distributors or competing
venues to maintain their competitive standing in the financial markets.
The Exchange believes the BATS One Feed will further enhance
competition by providing External Distributors with a data feed that
allows them to more quickly and efficiently integrate into their
existing products. Today, Distributors subscribe to various market data
products offered by single exchanges and resell that data, either
separately or in the aggregate, to their subscribers as part of the
their own market data offerings. Distributors may incur administrative
costs when consolidating and augmenting the data to meet their
subscriber's need. Consequently, many External Distributors will simply
choose to not take the data because of the effort and cost required to
aggregate data from separate feeds into their existing products. Those
same Distributors have expressed interest in the BATS One Feed so that
they may easily incorporate aggregated or summarized BATS Exchange data
into their own products without themselves incurring the costs of the
repackaging and aggregating the data it would receive by subscribing to
each market data product offered by the individual BATS Exchanges. The
Exchange, therefore, believes that by providing market data that
encompasses combined data from affiliated exchanges, the Exchange
enables certain External Distributors with the ability to compete in
the provision of similar content with other External Distributors,
where they may not have done so previously if they were required to
subscribe to the depth-of-book feeds from each individual BATS
Exchange.
Although the Exchange considers the acceptance of the BATS One Feed
by External Distributors as important to the success of the product,
depending on their needs, External Distributors may choose not to
subscribe to the BATS One Feed and may rather receive the BATS Exchange
individual market data products and incorporate them into their
specific market data products. For example, the BATS Premium Feed
provides depth-of-book information for up to five price levels while
each of the BATS Exchange's individual data feeds offer complete depth-
of-book and are not limited to five price levels.\43\ Those subscribers
who wish to view the complete depth-of-book from each individual BATS
Exchange may prefer to subscribe to one or all of individual BATS
Exchange depth-of-book data feeds instead of the BATS One Feed. The
BATS One Feed simply provides another option for Distributors to choose
from when selecting a product that meets their market data needs.
Subscribers who seek a broader market view but do not need complete
depth-of-book may select the BATS One Feed while subscribers that seek
the complete depth-of-book information may subscribe to the depth-of-
book feeds of each individual BATS Exchanges.
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\43\ See EDGA Rule 13.8, EDGX Rule 13.8, BZX Rule 11.22(a) and
(c), and BATS Rule 11.22 (a) and (c) for a description of the depth
of book feeds offered by each of the BATS Exchanges.
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Latency. The BATS One Feed is not intended to compete with similar
products offered by External Distributors. Rather, it is intended to
assist External Distributors in incorporating aggregated and summarized
data from the BATS Exchanges into their own market data products that
are provided to the end user. Therefore, Distributors will receive the
data, who will, in turn, make available BATS One Feed to their end
users, either separately or as incorporated into the various market
data products they provide. As stated above, Distributors have
expressed a desire for a product like the BATS One Feed so that they
may easily incorporate aggregated or summarized BATS Exchange data into
their own products without themselves incurring the administrative
costs of repackaging and aggregating the data it would receive by
subscribing to each market data product offered by the individual BATS
Exchanges.
Notwithstanding the above, the Exchange believes that External
Distributors may create a product similar to BATS One Feed based on the
market data products offered by the individual BATS Exchanges with
minimal latency difference. In order to create the BATS One Feed, the
Exchange will receive the individual data feeds from each BATS Exchange
and, in turn, aggregate and summarize that data to create the BATS One
Feed. This is the same process an External Distributor would undergo
should it create a market data product similar to the BATS One Feed to
distribute to its end users. In addition, the servers of most External
Distributors are likely located in the same facilities as the Exchange,
and, therefore, should receive the individual data feed from each BATS
Exchange on or about the same time the Exchange would for it to create
the BATS One Feed. Therefore, the Exchange believes that it will not
incur any potential latency advantage that
[[Page 44948]]
will result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act.
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 by 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
Intercontinental Exchange 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.'' \44\
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\44\ Press Release, U.S. Department of Justice, Assistant
Attorney General Christine Varney Holds Conference Call Regarding
Nasdaq OMX Group Inc. and Intercontinental Exchange 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.
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It is common for broker-dealers to further exploit this recognized
competitive constraint by sending their order flow and transaction
reports to multiple markets, rather than providing them all to a single
market. As a 2010 Commission Concept Release noted, the ``current
market structure can be described as dispersed and complex'' with
``trading volume . . . dispersed among many highly automated trading
centers that compete for order flow in the same stocks'' and ``trading
centers offer[ing] a wide range of services that are designed to
attract different types of market participants with varying trading
needs.'' \45\
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\45\ Concept Release on Equity Market Structure, Securities
Exchange Act Release No. 61358 (Jan. 14, 2010), 75 FR 3594 (Jan. 21,
2010) (File No. S7-02-10). This Concept Release included data from
the third quarter of 2009 showing that no market center traded more
than 20% of the volume of listed stocks, further evidencing the
dispersal of and competition for trading activity. Id. at 3598.
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In addition, in the case of products that are distributed through
market data vendors, the 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, vendors will not elect to make available the products
described herein unless their customers request them, and customers
will not elect to purchase them unless they can be used for profit-
generating purposes. All of these operate as constraints on pricing
proprietary data products.
Joint Product Nature of Exchange 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.\46\
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.\47\
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\46\ 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); 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.
\47\ 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 invariable proportions, it is impossible to determine
their individual average costs. This is because common costs are
expenses necessary for manufacture of a joint product. Common costs
of production--raw material and equipment costs, management
expenses, and other overhead--cannot be allocated to each individual
by-product on any economically sound basis . . . . Any allocation of
common costs is wrong and arbitrary.''). This is not new economic
theory. See, e.g., F. W. Taussig, ``A Contribution to the Theory of
Railway Rates,'' Quarterly Journal of Economics V(4) 438, 465 (July
1891) (``Yet, surely, the division is purely arbitrary. These items
of cost, in fact, are jointly incurred for both sorts of traffic;
and I cannot share the hope entertained by the statistician of the
Commission, Professor Henry C. Adams, that we shall ever reach a
mode of apportionment that will lead to trustworthy results.'').
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Analyzing the cost of market data product production and
distribution in isolation from the cost of all of the inputs supporting
the creation of market data and market data products will inevitably
underestimate the cost of the data and data products. Thus, because it
is impossible to obtain the data inputs to create market data products
without a fast, technologically robust, and well-regulated execution
system, system costs and regulatory costs affect the price of both
obtaining the market data
[[Page 44949]]
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 eleven 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. As stated above, broker-dealers
currently have numerous alternative venues for their order flow,
including eleven SRO markets, as well as internalizing BDs and various
forms of ATSs, including dark pools and ECNs. Each SRO market competes
to produce transaction reports via trade executions, and two FINRA-
regulated Trade Reporting Facilities (``TRFs'') compete to attract
internalized transaction reports. Competitive markets for order flow,
executions, and transaction reports provide pricing discipline for the
inputs of proprietary data products.
The large number of SROs, TRFs, 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, TRF, ATS, and BD is currently permitted to produce proprietary
data products, and many currently do so or have announced plans to do
so, including NASDAQ, NYSE, NYSE Amex, and NYSEArca.
Any ATS or BD can combine with any other ATS, BD, or multiple ATSs
or BDs to produce joint proprietary data products. Additionally, order
routers and market data vendors can facilitate single or multiple
broker-dealers' production of proprietary data products. The potential
sources of proprietary products are virtually limitless. The fact that
proprietary data from ATSs, BDs, and vendors can by-pass SROs is
significant in two respects. First, non-SROs can compete directly with
SROs for the production and sale of proprietary data products, as BATS
and Arca did before registering as exchanges by publishing proprietary
book data on the Internet. Second, because a single order or
transaction report can appear in an SRO proprietary product, a non-SRO
proprietary product, or both, the data available in proprietary
products is exponentially greater than the actual number of orders and
transaction reports that exist in the marketplace.
Retail broker-dealers, such as Schwab and Fidelity, offer their
customers proprietary data only if it promotes trading and generates
sufficient commission revenue. Although the business models may differ,
these vendors' pricing discipline is the same: they can simply refuse
to purchase any proprietary data product that fails to provide
sufficient value. The Exchange and other producers of proprietary data
products must understand and respond to these varying business models
and pricing disciplines in order to market proprietary data products
successfully.
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, and TracECN. A proliferation of dark pools and other
ATSs operate profitably with fragmentary shares of consolidated market
volume.
Regulation NMS, by deregulating the market for proprietary data,
has increased the contestability of that market. While broker-dealers
have previously published their proprietary data individually,
Regulation NMS encourages market data vendors and broker-dealers to
produce proprietary products cooperatively in a manner never before
possible. Multiple market data vendors already have the capability to
aggregate data and disseminate it on a profitable scale, including
Bloomberg and Thomson-Reuters.
Competitive forces constrain the prices that platforms can charge
for non-core market information. A trading platform cannot generate
market information unless it receives trade orders. For this reason, a
platform can be expected to use its market data product as a tool for
attracting liquidity and trading to its exchange.
While, by definition, information that is proprietary to an
exchange cannot be obtained elsewhere, this does not enable the owner
of such information to exercise monopoly power over that information
vis-[agrave]-vis firms with the need for such information. Even though
market information from one platform may not be a perfect substitute
for market information from one or more other platforms, the existence
of alternative sources of information can be expected to constrain the
prices platforms charge for market data.
Besides the fact that similar information can be obtained
elsewhere, the feasibility of supra-competitive pricing is constrained
by the traders' ability to shift their trades elsewhere, which lowers
the activity on the exchange and thus, in the long run, reduces the
quality of the information generated by the exchange.
Competition among platforms has driven the Exchange to improve its
platform data offerings and to cater to customers' data needs by
proposing the BATS One Feed. The vigor of competition for non-core data
information is significant and the Exchange believes that this proposal
clearly evidences such competition. The Exchange proposes the BATS One
Feed and pricing model in order to keep pace with changes in the
industry and evolving customer needs. It is entirely optional and is
geared towards attracting new customers, as well as retaining existing
customers.
The Exchange has witnessed competitors creating new products and
innovative pricing in this space over the course of the past year. In
all cases, firms make decisions on how much and what types of data to
consume on the basis of the total cost of interacting with the Exchange
or other exchanges. The explicit data fees are but one factor in a
total platform analysis. Some competitors have lower transactions fees
and higher data fees, and others are vice versa. The market for this
non-core data
[[Page 44950]]
information is highly competitive and continually evolves as products
develop and change.
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 proprietary data from other sources, ensures that
the Exchange cannot set unreasonable fees, or fees that are
unreasonably discriminatory, because vendors and subscribers can elect
these alternatives or choose not to purchase a specific proprietary
data product if its cost is not justified by the returns that 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
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days of such
date (i) as the Commission may designate if it finds such longer period
to be appropriate and publishes its reasons for so finding or (ii) as
to which the Exchange consents, the Commission shall:
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be 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 rule-comments@sec.gov. Please include
File Number SR-BATS-2014-028 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File Number SR-BATS-2014-028. 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, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of 10
a.m. and 3 p.m. Copies of the filing also will be available for
inspection and copying at the principal office of BATS. 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-BATS-2014-028 and should be
submitted on or before August 22, 2014.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\48\
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\48\ 17 CFR 200.30-3(a)(12).
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Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-18123 Filed 7-31-14; 8:45 am]
BILLING CODE 8011-01-P
