Justia Agencies And Commissions Securities And Exchange Commission Joint Industry Plan; Notice of Filing and Immediate Effectiveness of Amendment No. 33 to the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privileges Basis Submitted by the BATS Exchange, Inc., BATS Y-Exchange, Inc., Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange LLC, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, Nasdaq Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc., 60522-60536 [2014-23838]

Joint Industry Plan; Notice of Filing and Immediate Effectiveness of Amendment No. 33 to the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privileges Basis Submitted by the BATS Exchange, Inc., BATS Y-Exchange, Inc., Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange LLC, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, Nasdaq Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc., 60522-60536 [2014-23838]

Download as PDF 60522 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices SECURITIES AND EXCHANGE COMMISSION SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting asabaliauskas on DSK5VPTVN1PROD with NOTICES SECURITIES AND EXCHANGE COMMISSION Sunshine Act Meeting [Release No. 34–73279; File No. S7–24–89] Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission Investor Advisory Committee will hold a meeting on Thursday, October 9, 2014, in MultiPurpose Room LL–006 at the Commission’s headquarters, 100 F Street NE., Washington, DC. The meeting will begin at 10:00 a.m. (ET) and will be open to the public. Seating will be on a first-come, first-served basis. Doors will open at 9:30 a.m. Visitors will be subject to security checks. The meeting will be webcast on the Commission’s Web site at www.sec.gov. On September 17, 2014, the Commission issued notice of the Committee meeting (Release No. 33– 9647), indicating that the meeting is open to the public (except during portions of the meeting reserved for meetings of the Committee’s subcommittees), and inviting the public to submit written comments to the Committee. This Sunshine Act notice is being issued because a quorum of the Commission may attend the meeting. It was determined that no earlier notice thereof was possible. The agenda for the meeting includes: Remarks from Commissioners; a discussion of a recommendation of the Investor as Purchaser subcommittee and Investor Education subcommittee on the definition of accredited investor; a discussion of a recommendation of the Investor as Owner subcommittee on impartiality in the disclosure of preliminary voting results; an update on possible recommendations of the Market Structure subcommittee on the settlement cycle; a briefing by Commission staff on municipal finance bond market transparency; a discussion of issuer adoption of fee-shifting bylaws for intra-corporate litigation; and nonpublic subcommittee meetings. For further information, please contact the Office of the Secretary at (202) 551–5400. Notice is hereby given, pursuant to the provisions of the Government in the Sunshine Act, Public Law 94–409, that the Securities and Exchange Commission will hold a Closed Meeting on Thursday, October 9, 2014 at 2:00 p.m. Commissioners, Counsel to the Commissioners, the Secretary to the Commission, and recording secretaries will attend the Closed Meeting. Certain staff members who have an interest in the matters also may be present. The General Counsel of the Commission, or her designee, has certified that, in her opinion, one or more of the exemptions set forth in 5 U.S.C. 552b(c)(3), (5), (7), 9(B) and (10) and 17 CFR 200.402(a)(3), (5), (7), 9(ii) and (10), permit consideration of the scheduled matter at the Closed Meeting. Commissioner Piwowar, as duty officer, voted to consider the items listed for the Closed Meeting in closed session. The subject matter of the Closed Meeting will be: Institution and settlement of injunctive actions; Institution settlement of administrative proceedings; Litigation matter Other matters relating to enforcement proceedings. At times, changes in Commission priorities require alterations in the scheduling of meeting items. For further information and to ascertain what, if any, matters have been added, deleted or postponed, please contact the Office of the Secretary at (202) 551–5400. Dated: October 2, 2014. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–23989 Filed 10–3–14; 11:15 am] BILLING CODE 8011–01–P Dated: October 3, 2014. Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–23990 Filed 10–3–14; 11:15 am] BILLING CODE 8011–01–P VerDate Sep<11>2014 17:15 Oct 06, 2014 Jkt 235001 PO 00000 Frm 00079 Fmt 4703 Sfmt 4703 Joint Industry Plan; Notice of Filing and Immediate Effectiveness of Amendment No. 33 to the Joint SelfRegulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privileges Basis Submitted by the BATS Exchange, Inc., BATS YExchange, Inc., Chicago Board Options Exchange, Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX Exchange, Inc., Financial Industry Regulatory Authority, Inc., International Securities Exchange LLC, NASDAQ OMX BX, Inc., NASDAQ OMX PHLX LLC, Nasdaq Stock Market LLC, National Stock Exchange, Inc., New York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc. October 1, 2014. Pursuant to Section 11A of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 608 thereunder,2 notice is hereby given that on September 12, 2014, the operating committee (‘‘Operating Committee’’ or ‘‘Committee’’) 3 of the Joint SelfRegulatory Organization Plan Governing the Collection, Consolidation, and Dissemination of Quotation and Transaction Information for NasdaqListed Securities Traded on Exchanges on an Unlisted Trading Privilege Basis (‘‘Nasdaq/UTP Plan’’ or ‘‘Plan’’) filed with the Securities and Exchange Commission (‘‘Commission’’) an amendment to the Plan.4 This 1 15 U.S.C. 78k–1. CFR 242.608. 3 The Plan Participants (collectively, ‘‘Participants’’) are the: BATS Exchange, Inc.; BATS Y-Exchange, Inc.; Chicago Board Options Exchange, Incorporated; Chicago Stock Exchange, Inc.; EDGA Exchange, Inc.; EDGX Exchange, Inc.; Financial Industry Regulatory Authority, Inc.; International Securities Exchange LLC; NASDAQ OMX BX, Inc.; NASDAQ OMX PHLX LLC; Nasdaq Stock Market LLC; National Stock Exchange, Inc.; New York Stock Exchange LLC; NYSE MKT LLC; and NYSE Arca, Inc. 4 The Plan governs the collection, processing, and dissemination on a consolidated basis of quotation information and transaction reports in Eligible Securities for each of its Participants. This consolidated information informs investors of the current quotation and recent trade prices of Nasdaq securities. It enables investors to ascertain from one data source the current prices in all the markets trading Nasdaq securities. The Plan serves as the required transaction reporting plan for its Participants, which is a prerequisite for their trading Eligible Securities. See Securities Exchange Act Release No. 55647 (April 19, 2007), 72 FR 20891 (April 26, 2007). 2 17 E:\FR\FM\07OCN1.SGM 07OCN1 asabaliauskas on DSK5VPTVN1PROD with NOTICES Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices amendment represents Amendment No. 33 (‘‘Amendment No. 33’’) to the Plan and modifies the Plan’s fee schedule without the expectation of incremental revenue to the Participants. The Participants voted in accordance with the requirements of the Plan 5 to make the following changes to the Plan’s fee schedule: (1) Decrease the Professional Subscriber Fee from $23 to $22 per month per interrogation device; (2) Increase the per-query charge from $0.005 to $0.0075; and (3) Establish Non-Display fees for three categories of Non-Display use. These ‘‘2015 Fee Changes’’ respond to long-term changes in data-usage trends. In formulating the proposed fee changes, the Participants formed a subcommittee to study trends among market data users and consulted with the industry representatives that sit on the Plans’ Advisory Committees and with other industry Participants. The Participants also met with the Securities Industry and Financial Markets Association (‘‘SIFMA’’). Pursuant to Rule 608(b)(3)(i) under Regulation NMS, the Participants hereby designate the proposed Amendment 33 as establishing or changing a fee or other charge collected on their behalf in connection with access to, or use of, the facilities contemplated by the Plans. As a result, Amendment 33 becomes effective upon filing with the Commission. The changes will be implemented on January 1, 2015. At any time within 60 days of the filing of Amendment No. 33, the Commission may summarily abrogate Amendment No. 33 and require that the Amendment be refiled in accordance with paragraph (a)(1) of Rule 608 and reviewed in accordance with paragraph (b)(2) of Rule 608, if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanisms of, a national market system or otherwise in furtherance of the purposes of the Act. The Commission is publishing this notice to solicit comments from interested persons. 5 Section IV(C)(2) of the Plan provides that ‘‘the affirmative vote of two-thirds of the Participants entitled to vote shall be necessary to’’ establish new fees or increase existing fees relating to Quotation Information and Transaction Reports in Eligible Securities. A unanimous affirmative vote of the Operating Committee was conducted on August 13, 2014 and recorded in the official minutes of that meeting. VerDate Sep<11>2014 17:15 Oct 06, 2014 Jkt 235001 I. Rule 608(a) A. Purpose of the Amendments (a) Background The Participants made several changes to the fee schedule effective as of January 1, 2014.6 Those changes introduced reporting by redistributors on a ‘‘net’’ basis, increased the Professional Subscriber device fee, the Enterprise Maximum for Nonprofessional Subscriber usage, and the Direct Access fee, and established Real-Time and Delayed Redistributor fees (collectively, the ‘‘January 2014 Fee Changes’’). They also complied with industry requests that the participants in the several national market system plans strive to harmonize fee structures under those plans. In submitting the January 2014 Fee Changes to the Commission, the Participants identified past attrition and the expectation of continued attrition in the reporting and consumption of consolidated market data. They anticipated that the January 2014 Fee Changes would generate enough revenue to offset the revenue declines resulting from that attrition. Actual experience with the January 2014 Fee Changes shows that, for the first six months of 2014, revenues under the Plan rose five percent relative to the second half of 2013, but not enough to recover from attrition losses over the past three years. Prior to the January 2014 Fee Changes, the Participants last increased the Professional Subscriber device fees in 1997. Since then, significant change has characterized the industry, stemming in large measure from technological advances, the advent of trading algorithms and automated trading, new investment patterns, new securities products, unprecedented levels of trading, decimalization, internationalization and developments in portfolio analysis and securities research. Measures of Plan inputs and outputs have expanded dramatically, including the number of exchange participants, messages per period, message speed, and total shares and dollar volume of trading. Related measures of value to the industry have improved and related industry costs have fallen, including the cost per message, the cost per trade, and the cost per share and dollar volume traded. The 2015 Fee Changes would realign the Plans’ fees more closely with the ways in which Data Feed Recipients consume market data today. Although Professional Subscriber Display Device 6 See Release No. 34–70953; File No. S7–24–89 (December 4, 2013), https://www.gpo.gov/fdsys/pkg/ FR-2013-12-04/html/2013-28970.htm. PO 00000 Frm 00080 Fmt 4703 Sfmt 4703 60523 fees still account for a majority of Plan revenues, the industry’s use of Professional Subscriber Display Devices continues to decline and the gap between Professional Subscriber device rates and Nonprofessional Subscriber fees remains large. The proposed fee changes would reduce the rates that Professional Subscribers pay for each of their Display Devices. To offset the revenue losses attributable to the reduction in Professional Subscriber device rates, the Participants propose to establish fees for Non-Display consumption of market data and to raise the fee payable in respect of per-quote services. The 2015 Fee Changes also move in the direction of continuing to harmonize fee structures under the Plan with fee structures under the CTA Plan, the CQ Plan and the OPRA Plan. This would further reduce administrative burdens for broker-dealers and other market data users and further simplify usage reporting and calculations related to the unit of count. While the 2015 Fee Changes will rebalance the fee schedule, the Participants anticipate that the proposed 2015 Fee Changes would have only a small impact on Plan revenues, increasing those revenues by approximately two to three percent over the prior year. Of course, that number is hard to estimate, given the uncertainties of Non-Display use revenues and declining Level 1 Professional populations. (b) The Proposed Changes i. Professional Subscriber Fee Prior to the January 2014 Fee Changes, the Professional Subscriber device fee had remained at $20 per month since 1997. The January 2014 Fee Changes raised it to $23 per month. Amendment 33 would reduce the Professional Subscriber device fee from $23 per month to $22 per month. At $22 per month, the increase amounts to an increase of one-half of one percent per year over a 17-year period. During that period, the amount of market data and the categories of information distributed through the UTP Level 1 Service have grown dramatically. Since then, the securities information processor under the Plan (the ‘‘SIP’’) has made hundreds of modifications to the UTP Trade Data Feed and the UTP Quotation Data Feed (‘‘UQDF’’) to keep up with changes in market structure, regulatory requirements and trading needs. These modifications have added elements such as new messages, new fields, and new values within designated fields to the UTP Level 1 Service. These E:\FR\FM\07OCN1.SGM 07OCN1 60524 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices modifications have caused the UTP Level 1 Service to support such industry developments as Regulation NMS, decimalization, limit up/limit down, and many other changes. In addition to the many modifications, the number of quotes and trades that the Participants have reported under the Plan has grown dramatically. As an example of the growth in quotes distributed over the UTP Level 1 Service, from the fourth quarter of 2010 to the second quarter of Tape C quote metrics 2014, UTP UQDF Peak Quotes Per Second has increased by 130% from 119,347 to 273,996. Over that period, the Average Quotes Per Day has increased more than 32% to 112,621,874 [www.utpplan.com]. Q2 2014 Q4 2010 Peak Quotes Per Second ............................................................................................................ Avg. Quotes Per Day ................................................................................................................... Avg. Quote Latency (ms) ............................................................................................................. 273,996 112,621,874 0.59 As an example of the growth in trades distributed over the UTP Level 1 Service, from the fourth quarter of 2010 97,232. Over that period, the Average Trades Per Day has increased more than 76% to 11,027,210 [www.utpplan.com]. to the second quarter of 2014, UTP UTDF Peak Trades Per Second has increased by a 221% from 30,292 to Tape C trade metrics Q2 Peak Trades Per Second ............................................................................................................ Avg. Trades Per Day ................................................................................................................... Avg. Quote Latency (ms) ............................................................................................................. 2014 97,232 11,027,210 0.72 119,347 85,402,614 4.5 Difference (percent) Q4 2010 30,292 6,251,074 6 130 32 ¥87 Difference (percent) 221 76 ¥88 Professional Subscriber fees collected have declined as well. For example, as of September 30, 2011, the Plan’s 382,862 Professional Subscribers paid $7,657,240 per month.7 As of September 30, 2012, the Plan’s 351,106 Professional Subscribers paid $7,022,120. As of September 30, 2013, the Plan’s 295,192 Professional Subscribers paid $5,903,890. As of June, 2014, the Plan’s 259,728 Professional Subscribers paid only $5,973,744 7 Professional Subscriber counts are calculated and published quarterly and posted on utpplan.org. The latest quarterly figures reflect a 15 percent annual decline in Professional Subscribers. See https://www.utpplan.com/. VerDate Sep<11>2014 17:15 Oct 06, 2014 Jkt 235001 (which reflects the rate increase established in the January 2014 Fee Changes). In sum, monthly revenues from Professional Subscriber device fees for June 2014 remain more than $1,683,486 below the level of Professional usage fees collected in September 2011, notwithstanding the rate increase established in the January 2014 Fee Changes. Fees for UTP Level 1 compare favorably to fees for comparable Network A and B data. Under the CT/ CQ Network A tiered structure, a firm reports how many Display Devices the Professional Subscriber employs; that number then is used to determine the PO 00000 Frm 00081 Fmt 4703 Sfmt 4703 tier within which the firm falls. Until last September, the Network A fees for Professional Subscribers ranged from $18.75 per device for firms employing Professional Subscribers who use more than 10,000 devices to $127.25 per device for an individual Professional Subscriber. In June of 2013, Network A lowered that range to $20 to $50 per device. The Participants understand that Network A intends to lower that range in the near future to $19 to $45.8 Also 8 Specifically, the Network A monthly fees for Professional Subscriber devices would become $45 per month for users with 1 or 2 devices, $27 per month for users with 3 to 999 devices, $23 per month for users with 1,000 to 9,999 devices, and E:\FR\FM\07OCN1.SGM 07OCN1 EN07OC14.023</GPH> asabaliauskas on DSK5VPTVN1PROD with NOTICES At the same time, Professional Subscribers’ usage of Level 1 data has been declining: Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices in June of 2013, Network B combined the fees payable for a Professional Subscriber’s receipt of quotation information and last sale price information and set the combined monthly fee at $24 per month. The combined $24 rate reduced costs for most Professional Subscribers, with the exception of a small number of Data Feed Recipients who receive last sale or quotation information, but not both. The Participants understand that Network B intends to lower that rate in the near future from $24 to $23. Under the OPRA Plan, the device fee is currently $27 per month. The Participants anticipate that the revenue losses that would result from the reduction in Professional Subscriber device rate from $23 to $22 would be offset by the other proposed amendments to the fee schedule and that, in the aggregate, the 2015 Fee Changes would not result in a material change in overall revenues under the Plans. asabaliauskas on DSK5VPTVN1PROD with NOTICES ii. Per-Query Fee As an alternative to monthly professional subscriber and nonprofessional subscriber fees, a vendor may respond to end-user queries for quote and trade information and pay a fee for each such response. The Participants first established the perquery fee in 1992 as a pilot at $0.015 per query. In 1995, it was noted that the Nasdaq/UTP per-query fee was three times that of the Network A and Network B counterparts. Subsequently, the Nasdaq/UTP per-query fee was made a permanent part of the fee schedule and was lowered to $0.01 per query to be more in line with Networks A and B. In April 1999, a pilot at a reduced rate of $.005 per query was filed and in April 2001, it was approved as the permanent fee structure. The fee has remained at $0.005 per query ever since. The Participants are now proposing to increase the fee to $0.0075 per query. This increase would help to offset the revenue loss that will result from the decrease in the Professional Subscriber device fee. Effective June 1, 2013, the Participants in the OPRA Plan increased their per-query fee to $0.0075.9 In addition, the Participants understand that the Network A Participants and the Network B Participants are contemplating similar increases to $19 per month for users with 10,000 or more devices. 9 See Release No. 34–69448; File No. SR–OPRA– 2013–01 (April 25, 2013), https://www.sec.gov/rules/ sro/nms/2013/34-69448.pdf. VerDate Sep<11>2014 17:15 Oct 06, 2014 Jkt 235001 $0.0075 per query under the CTA Plan and the CQ Plan. The Participants note that increasing the per-query fee to $0.0075 would continue to harmonize the per-query fee structure under the national market system plans and would contribute toward restoring a more appropriate balance of fees in recognition of the declining significance of revenues derived from Professional Subscriber device fees. The increase in revenues resulting from the proposed increase in the per-query fees would represent an appropriate contribution for that service to covering the overall costs of the Participants in collecting, processing and distributing market data under the Plans. iii. Non-Display Fees A. Background. Changes in regulation and advances in technology have had an impact on market data usage in recent years. Automated and algorithmic trading has proliferated, the numbers of quotes and trades have increased significantly and Data Feeds have become exponentially faster. Today, Non-Display Devices consume large amounts of data, and can process the data far more quickly than any human being looking at a terminal. Today, such devices are responsible for a majority of trading. Many firms incorporate NonDisplay data into trading applications, without the need for their employees to have widespread access to the data. It enables them to generate considerable profits. These changes in market data consumption patterns show that NonDisplay use now constitutes a significant portion of the industry’s consumption of market data and that market data adds considerable value to many firms’ business model. As a result, the Participants have determined that the establishment of fees for Non-Display uses of data, along with a reduction in the Professional Subscriber device fee and the increase in the per-query fee, would provide an equitable allocation of fees to the industry, would facilitate the administration of Non-Display uses of market data and would equitably reflect the value of Non-Display and display data usage. The Participants believe that the proposed fees reflect the value of the data provided and note that NonDisplay fees have become commonplace in the industry. Several exchanges impose Non-Display fees for their proprietary data products, as does the OPRA Plan. In addition, the Participants understand that the Network A Participants and the Network B Participants are also contemplating the PO 00000 Frm 00082 Fmt 4703 Sfmt 4703 60525 establishment of fees for Non-Display uses of data. B. Definition of Non-Display Use. For purposes of the proposed fees, NonDisplay use refers to accessing, processing or consuming data, whether received via direct and/or redistributor Data Feeds, for a purpose other than solely facilitating the delivery of the data to the Data Feed Recipient’s display or for the purpose of further internally or externally redistributing the data. Further redistribution of the data refers to the transportation or dissemination to another server, location or device. In instances where the Data Feed Recipient is using the data in Non-Display to create derived data and use the derived data for the purposes of solely displaying the derived data, then the Non-Display fee schedule does not apply, but the data may be fee liable under the regular fee schedule. C. Categories of Non-Display Use. The Participants recognize three types of Non-Display Uses as follows: (a) The Non-Display fee for Electronic Trading Systems applies when a datafeed recipient makes a Non-Display of data in an electronic trading system, whether the system trades on the datafeed recipient’s own behalf or on behalf of its customers. This fee includes, but is not limited to, use of data in any trading platform(s), such as exchanges, alternative trading systems (‘‘ATS’s’’), broker crossing networks, broker crossing systems not filed as ATS’s, dark pools, multilateral trading facilities, and systematic internalization systems. An organization that uses data in electronic trading systems must count each platform that uses data on a nondisplay basis. For example, an organization that uses quotation information for the purposes of operating an ATS and also for operating a broker crossing system not registered as an ATS would be required to pay two Electronic Trading System fees. (b) Non-Display Enterprise Licenses. The Participants recognize two types of Non-Display Licenses as follows: (i) The Non-Display fee for Internal Use applies when a datafeed recipient’s Non-Display usage is on its own behalf (other than for purposes of an electronic trading system). (ii) The Non-Display fee for External Use applies when a datafeed recipient’s Non-Display usage is on behalf of its customers (other than for purposes of an electronic trading system). The two types of Non-Display Enterprise Licenses include, but are not limited to, use of data for automated order or quote generation and/or order E:\FR\FM\07OCN1.SGM 07OCN1 asabaliauskas on DSK5VPTVN1PROD with NOTICES 60526 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices pegging, price referencing for algorithmic trading, price referencing for smart order routing, operations control programs, investment analysis, order verification, surveillance programs, risk management, compliance or portfolio valuation. D. Examples of Non-Display Uses of Market Data. Examples of the NonDisplay Electronic Trading System Fee include, but are not limited to: • Any trading in any asset class • Exchanges • Alternative trading systems (ATSs) • Broker crossing networks • Broker crossing systems not filed as ATSs • Dark pools • Multilateral trading facilities • Systematic internalization systems Examples of Non-Display Use for Non-Display fee for Internal Use and Non-Display fee for External Use include, but are not limited to: • Automated order or quote generation and/or order pegging • Price referencing for algorithmic trading • Price referencing for smart order routing • Operations control programs • Investment analysis • Order verification • Surveillance programs • Risk management • Compliance • Portfolio valuation E. Non-Display Fee. For each of type of fee, the Participants propose to impose a monthly fee of $3500 for the Non-Display use of the combined last sale price information and quotation information. By way of comparison, the Participants understand that Network A intends to establish separate monthly Non-Display Fees of $2,000 for last sale prices plus $2,000 for quotation information and that Network B intends to establish monthly Non-Display Fees of $1,000 for last sale prices plus $1,000 for quotation information. In addition, the Non-Display fee for Electronic Trading Systems applies once to each Data Feed Recipient’s account for each of the firm’s electronic trading systems. If a firm uses quotes solely to operate a dark pool for its customers’ orders and makes no other Non-Display use of market data, it would pay the Non-Display fee for Electronic Trading Systems (and not the other Non-Display Licenses). If that firm also uses quotes to operate an ATS, but still makes no other Non-Display uses of market data, it would pay two Non-Display fees for Electronic Trading Systems fees (and no other Non-Display Licenses). VerDate Sep<11>2014 17:15 Oct 06, 2014 Jkt 235001 The fees for Non-Display Enterprise Licenses are enterprise licenses for the Non-Display uses that fall within either Internal or External usage. Only one Non-Display Enterprise License fee applies to each Data Feed Recipient’s account regardless of the number of Non-Display uses of data the firm makes within that category (either Intenral or External). For instance, if a firm makes Non-Display uses of data to analyze investments for its own portfolio, to value that portfolio, to verify the firm’s proprietary orders and to run compliance programs for the firm, the firm would pay only one Non-Display fee for Internal Use fee. Similarly, if a firm makes Non-Display uses of data to analyze investments for customers, to verify customer orders, to surveil the market it conducts for customers, to provide risk management services to customers and to value its customers’ portfolios, the firm would pay only one Non-Display fee for External Use fee. Finally, if a firm makes Non-Display uses of data to analyze investments for its own portfolio and to analyze investments for customers, the firm would pay both the Non-Display fee for Internal Use and the Non-Display fee for External Use fee. The fees apply to each of a Data Feed Recipient’s accounts that uses market data for Non-Display purposes. The Participants would only invoice Data Feed Recipients that make Non-Display uses of real-time market data on a monthly basis. A firm may use data for each of NonDisplay fees and thereby subject itself to the Non-Display fee for each category. For example, if a broker-dealer operates an ATS (Non-Display fee for Electronic Trading Systems), operates a trading desk to trade with its own capital (NonDisplay fee for Internal Use), and operates a separate trading desk to trade on behalf of its clients (Non-Display fee for External Use), then the Non-Display fee would apply in respect of all three categories. If, in addition to the ATS, the firm also operates a broker crossing system not registered as an ATS, then two Non-Display fees for Electronic Trading Systems would apply in respect of each market data product. That is, a firm must count each electronic trading system that uses data for payment of the Non-Display fee for Electronic Trading Systems. F. Administrative Requirements for Non-Display Uses. In response to feedback received from SIFMA, the Participants seek to minimize the administrative burden attendant to NonDisplay fees and, therefore, have determined not to impose a monthly reporting requirement. Instead, the PO 00000 Frm 00083 Fmt 4703 Sfmt 4703 Participants would require each recipient of a real-time Data Feed to make an annual declaration of its NonDisplay use to the Participants. They would require each Data Feed Recipient to complete and submit the declaration upon its initial receipt of a Data Feed under the UTP Plan. In addition, if a Data Feed Recipient’s use of data changes at any time after the Data Feed Recipient submits its declaration or annual confirmation or update, the Participants would require the Data Feed Recipient to update its declaration at the time of the change to reflect the change of use. The Participants believe that use of the declaration would keep administrative burdens at a minimum, as SIFMA requested. The Participants reserve the rights: (a) To audit Data Feed Recipients’ Non-Display use of market data in accordance with the terms of their market data agreements with vendors and others; and (b) charge Non-Display fees to Data Feed Recipients that do not report any display activity, and do not return a completed declaration in accordance with the requirements specified above. B. Impact of the Proposed Fee Changes As with any rebalancing of fees, these 2015 Fee Changes may result in some Data Feed Recipients paying higher total market data fees and in others paying lower total market data fees. The Participants anticipate that the 2015 Fee Changes will not generate enough revenue to offset past and future attrition in reported consolidated market data activity data. That attrition (‘‘Attrition’’) takes two primary forms. First, the reduction in Professional Subscriber device fees will reduce revenues under the Plan. They estimate that the percentage of total Plan revenues derived from Professional Subscriber device fees will fall as a result of the reduction in the fee from 59 percent to 54 percent. Second, several customer-usage trends have declined year-over-year since 2008, particularly declines in Professional Subscriber’s consumption of consolidated market data. (More information on these declines can be found in the Participants’ Consolidated Data Quarterly Operating Metrics Reports. Those reports can be found at https://www.utpplan.com). The decline in Professional Subscriber data usage has resulted from a challenging financial environment, and corporate downsizing, as well as a liberalization of the SEC’s Vendor Display Rule that has permitted substitution of lower-cost and E:\FR\FM\07OCN1.SGM 07OCN1 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices asabaliauskas on DSK5VPTVN1PROD with NOTICES lower-value proprietary data product offerings. As a result of these declines, revenues generated under the Plans have declined significantly. Since 2008, CTA/UTP market data revenue has declined 16 percent from approximately $463 million in 2008 to $388 million annualized through March of 2014. The Participants will review the impact of the 2015 Fee Changes on an on-going basis and reserve the right to further amend fees in the future, subject to filing any such amended fees with the Commission in accordance with Regulation NMS. Because the Non-Display fee would be new, it is difficult to estimate the impact they would have on revenues. A best guess is that they would account for approximately 5 percent of revenues. If current usage levels remain the same, the increase in the per-query fee would raise revenues by approximately 1 percent. The decline in the Professional fee would decrease revenues by 5 percent, assuming there was no additional attrition. Most firms would be impacted only slightly by the 2015 Fee Changes, though a small number of firms would see a more significant impact. Some of the largest firms would realize sizable savings or a large increase in costs. The Participants estimate that the changes would increase Plan revenues by approximately two to three percent over the prior year, though that number is hard to estimate, given the uncertainties of Non-Display use revenues and declining Level 1 Professional populations. The Participants note that the 2015 Fee Changes would contribute to stemming the significant loss of revenues under the Plans in recent years as a result of large multi-year declines in Display Devices that Professional Subscribers use. Furthermore, the rise in off-exchange trading has meant that a smaller portion of those revenues have been allocated to exchanges. Thus, the Participants believe that the 2015 Fee Changes would not result in a material increase in overall revenues under the Plans, but would help to stem the tide of declining revenues caused by trends in the use of Display Devices by Professional Subscribers. C. Governing or Constituent Documents Not applicable. D. Implementation of the Amendments Rule 608(b)(3)(i) of Regulation NMS (the ‘‘Rule’’) permits the Participants to designate a proposed plan amendment as establishing or changing fees and other charges, and to place such an VerDate Sep<11>2014 17:15 Oct 06, 2014 Jkt 235001 amendment into effect upon filing with the Commission. As mentioned above, the Participants have made that designation. The Rule does not place any limitations on which particular fee changes qualify for immediate effectiveness. Rather, if the Commission believes that a longer comment period is appropriate for a particular filing, it may extend the comment period or abrogate the filing. Ample precedents exist for the filing of multiple or even complex fee changes to NMS Plans on an immediately effective basis over the past thirty years.10 Pursuant to the Rule, the Participants have designated Amendment 33 as establishing or changing fees, and will have notified the industry of the proposed Fee Changes well in advance of Amendment 33’s effective date. The Participants anticipate implementing the proposed 2015 Fee Changes on January 1, 2015, and intend to give further notice to Data Feed Recipients and end-users of the 2015 Fee Changes. E. Development and Implementation Phases See Item I(C) above. F. Analysis of Impact on Competition The proposed amendments do not impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Exchange Act. The proposed fee changes reflect the Participants’ views that it is appropriate to rebalance the allocation of market data fees and to better track the changing trends in the ways in which the industry uses market data. The proposed fee changes comport with the proliferation of the use of data for dark pools and other Non-Display trading applications. They recognize industry changes that have evolved as a result of numerous technological advances, the advent of trading algorithms and automated trading, different investment patterns, a plethora of new securities products, unprecedented levels of trading, and 10 See, e.g., Fifth Charges Amendment to the First Restatement of the CTA Plan, File No. S7–433, Release No. 34–19342, 47 FR 57369 (December 23, 1982); Fourteenth Charges Amendment to the First Restatement of the CTA Plan and Fifth Charges Amendment to the original CQ Plan, File No. S7– 30–91, Release No. 34–29863, 56 FR 56429 (November 4, 1991); Second Charges Amendment to the CTA Plan and First Charges Amendment to the CQ Plan, SR–CTA/CQ–97–2, Release No. 34–39235, 62 FR 54886 (October 14, 1997); OPRA Plan amendment SR–OPRA–2004–01, Release No. 34– 49382, 69 FR 12377 (March 16, 2004); OPRA Plan amendment SR–OPRA–2007–04, Release No. 34– 56950, 72 FR 71722 (December 18, 2007); OPRA Plan amendment SR–OPRA–2012–02, Release No. 34–66564, 77 FR 15833 (March 16, 2012). PO 00000 Frm 00084 Fmt 4703 Sfmt 4703 60527 developments in portfolio analysis and securities research. In addition, the 2015 Fee Changes would simplify firms’ administrative burdens by harmonizing the Plans’ fee structures with those under the CTA Plan, the CQ Plan and the OPRA Plan. The use of an annual declaration for Non-Display Use reporting purposes would alleviate the burden of counting devices used for non-trading purposes. The Participants note that the list of exchanges that have previously implemented Non-Display fees includes the London Stock Exchange, Nasdaq BX, Nasdaq PSX, Nasdaq, NYSE, NYSE MKT LLC and NYSE Arca. They note that the OPRA Plan imposes NonDisplay fees and that they understand that the Participants in the CTA Plan and the CQ Plan anticipate doing so shortly. The Participants hope that the reductions in the Professional Subscriber Display Device rate will foster the widespread availability of real-time market data. At the same time, the new fees for Non-Display uses of market data would cause firms making Non-Display use of data to make appropriate contributions to the costs of collecting, processing and redistributing the data. In addition, the proposed fee changes would cause the Plan’s fees to sync more closely with fee structures under the CTA Plan, the CQ Plan and the OPRA Plan. The proposed reductions in the Professional Subscriber device fee would allow that fee to compare even more favorably with the Professional Subscriber device fees payable under those other Plans and with the Professional Subscriber device fees charged for market data by the largest stock exchanges around the world. The proposed Non-Display fees compare favorably with the comparable fees that the Participants understand the Participants in the CTA Plan and the CQ Plan intend to establish and with the Non-Display fees that individual exchanges charge for their proprietary products. The proposed increase in the per-query fees would harmonize those fees with the per-query fees paid under the OPRA Plan and the comparable fee that the Participants understand the Participants in the CTA Plan and the CQ Plan intend to set. As a result, the 2015 Fee Amendments would promote consistency in fee structures among the national market system plans, as well as consistency with the preponderance of other market data providers. This would make market data fees easier to administer for Data Feed Recipients. E:\FR\FM\07OCN1.SGM 07OCN1 60528 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices In the Participants’ view, the proposed fee schedule would result in each category of Data Feed Recipient and data user contributing an appropriate amount for their receipt and use of market data under the Plan. The proposed fee schedule would provide for an equitable allocation of dues, fees, and other charges among broker-dealers, vendors, end-users and others receiving and using market data made available under the Plan by recalibrating the fees to more closely correspond to the different benefits different categories of users derive from their different uses of the market data made available under the Plan. The Participants propose to apply the revised fee schedule uniformly to all constituents (including members of the Participant markets and non-members). The Participants do not believe that the proposed fee changes introduce terms that are unreasonably discriminatory. The Participants note that fees under the CTA and CQ Plan compare very favorably with the fees that individual exchanges charge for their proprietary data products. G. Written Understanding or Agreements Relating to Interpretation of, or Participation in, Plan Not applicable. H. Approval by Sponsors in Accordance With Plan In accordance with Section IV(C)(2) of the Plan, more than two-thirds of the Participants have approved the 2015 Fee Change. I. Description of Operation of Facility Contemplated by the Proposed Amendments Not applicable. J. Terms and Conditions of Access See Item I(A) above. asabaliauskas on DSK5VPTVN1PROD with NOTICES K. Method of Determination and Imposition, and Amount of, Fees and Charges 1. In General The Participants took a number of factors into account in deciding to propose the 2015 Fee Changes. To begin, the Participants’ market data staff communicates on an on-going basis with all sectors of the Participants’ constituencies and assesses and analyzes the different broker/dealer and investor business models. The staff has expertise in the information needs of the Participants’ constituents and used their experience and judgment to form recommendations regarding the 2015 Fee Changes, vetted those recommendations with constituents and VerDate Sep<11>2014 17:15 Oct 06, 2014 Jkt 235001 revised those recommendations based on the vetting process. Most significantly, the Participants went back and carefully listened to the recommendations of their Advisory Committee. The Plan requires the Advisory Committee to include, at a minimum, a broker-dealer with a substantial retail investor customer base, a broker-dealer with a substantial institutional investor customer base, an alternative trading system, a data vendor, and an investor. Advisory Committee members attend and participate in meetings of the Participants and receive meeting materials. Members of the Advisory Committee gave valuable input that the Participants used in crafting the proposed 2015 Fee Changes. At several meetings of the Plan’s Operating Committee, Advisory Committee members gave valuable input into the formulation of the 2014 Fee Amendments. In reassessing and rebalancing market data fees as proposed in the amendments, the Participants took a number of factors into account in addition to the views of its constituents, including: (a) Examining the impact that they expect attrition to have on revenues; (b) crafting fee changes that will not have a significant impact on total revenues generated under the Plans; (c) setting fees that compare favorably with fees that the biggest exchanges around the globe and the CT/CQ Plan and the OPRA Plan charge for similar services; (d) setting fees that require each category of market Data Feed Recipient and end-user to contribute market data revenues that the Participants believe are appropriate for that category; (e) crafting fee changes that appropriately differentiate between constituents in today’s environment (e.g., Non-Display firms vs. registered representative firms; large firms vs. small firms; redistributors vs. endusers); and (f) crafting fees that reduce administrative burdens of Data Feed Recipients and, in the case of the new Non-Display Use fees, minimizes administrative requirements. 2. An Overview of the Fairness and Reasonableness of Market Data Fees and Revenues Under the Plans a. The Fee Changes Will Have No Impact on Most Individual Investors The vast majority of Nonprofessional Subscribers (i.e., individual investors) receive market data from their brokers and vendors. The Participants impose PO 00000 Frm 00085 Fmt 4703 Sfmt 4703 Nonprofessional Subscriber fees on the brokers and vendors (rather than the investors) and set those fees so low that most brokers and vendors tend to absorb the fees, meaning that the vast majority of individual investors do not pay for market data. The Participants anticipate that the changes to the per-query fee would not have a significant impact on the willingness of broker-dealers to continue to pay the fee on behalf of their customers. The 2015 Fee Changes, including the proposed increase in the per-query fee, will thus have almost no impact on Nonprofessional investors. b. The Fee Changes Respond to Customer Wishes The Fee Changes are fair and reasonable because they offer a resolution to the call by industry participants for a simplified, updated fee schedule that harmonizes with fee schedules under other national market system plans and reduces administrative burdens, a resolution that industry representatives on the Plans’ Advisory Committee have warmly embraced. c. Long-Term Trend of Rate Reduction The existing constraints on fees for core market data under the Plan have generally succeeded in reducing market data rates over time. For example, when the effects of inflation are taken into account, the average monthly rate payable for Professional Subscriber device has consistently and dramatically fallen in real terms over the past 16 years. When inflation is taken into account, the real monthly cost of a Professional Subscriber device was $20 in 1997; $17.84 in 2002; $15.48 in 2007 and $13.98 in 2012. Put differently, had price increases kept pace with inflation, the cost of Professional usage of Level 1 data would have increased from $20 in 1997 to $21.94 in 2001; $23.94 in 2005; $27.86 in 2009; and $29.80 in 2014.11 d. Explosion of Data Although the device fees have fallen after taking inflation into account, the amount of data message traffic that endusers receive by subscribing has skyrocketed, as has the speed at which the data is transmitted. i. New Data Added to Consolidated Feeds The Participants have continually enhanced the consolidated feeds. The enhancements provide significant value. They are critical to the industry in that 11 Based on COLA changes, as found at www.ssa.gov. E:\FR\FM\07OCN1.SGM 07OCN1 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices they permit end-users to do such things as view new markets and implement new regulation. Below is a list of the more significant recent enhancements, including the addition of new Participants, new indicators, new sale 60529 conditions, new reason codes and dedicated test symbols. Milestones 2014 January .......................................... February ......................................... March ............................................. April ................................................ May ................................................ June ............................................... July ................................................. Implemented January 2014 bid rate changes: • Quotes: 379,500mps • Trades: 77,960mps Cleaned SAN fiber cable ends to resolve intermittent connectivity issue. Reset network interface on monitoring server to resolve connectivity issue. Implemented socket handler fixes and ACE library upgrade in primary OMDF. Backend in primary production environment. Implemented miscellaneous bug fixes for several internal components. Implemented socket handler fixes and ACE library upgrade in secondary OMDF. Backend in primary production environment and disaster recovery environment. Implement bandwidth increase for OMDF to 12,000mps. Implemented daily .csv file with 100ms peak traffic rate data. Increased OMDF database transaction log backup frequency from 2 hours to 5 minutes. Replaced faulty LUN for SRA 2011 historical data. Implemented load balancer upgrade (primary production site). Implemented peak traffic statistics spreadsheet automation. Implemented FEP upgrade (primary production site). Implemented Reference Price Calculator fix for price band clearing. Implemented trade FEP fix for regional reference number return. Implemented penalty report generation fix for arithmetic overflow. Implemented quote FEP fix for regional reference number return. Implemented fix for internal acknowledgement issue from April 3. Implemented back end server tuning changes. Removed CBSX bid rates in UQ/UT resulting from their deactivation request. Implemented database server tuning changes. Extended Limit Up/Limit Down price band publication to market close. Upgraded firmware on server in D/R environment to resolve reboot issues. Implemented disaster recovery build-out, including F5 load balancer and automatic quote wipeout on D/R failover. Upgraded firmware on server in primary production environment to resolve reboot issues. Upgraded BLU and Back End components in primary production environment with D/R build-out software versions. Upgraded FEP components in primary production environment with D/R build-out software versions. Implemented UQDF and UTDF bandwidth upgrade Implemented Republisher server tuning changes. Implemented July 2014 bid rate changes: • Quotes: 483,400mps • Trades: 117,000mps Implemented penalty software using 100ms measurement interval. Implemented new Supervisory Console page. Implemented retransmission handling fix for all primary UQDF and UTDF dissemination components. 2013 January .......................................... asabaliauskas on DSK5VPTVN1PROD with NOTICES February ......................................... March ............................................. VerDate Sep<11>2014 17:15 Oct 06, 2014 Implemented January 2013 bid rate changes: • Quotes: 227,701mps • Trades: 38,300mps Reconfigured UQDF, UTDF, and OMDF servers to restore network switch diversity for primary and backup services. Implemented Limit Up/Limit Down Software (no stocks eligible). Implemented secure FTP server for SRA. Implemented UTP Data Feed bandwidth increase: • UQDF 256Mb—400,000 MPS • UTDF 101 Mb—150,000 MPS • OMDF 2 MB—2,800 MPS Implemented reference price calculator/price band dissemination. Enabled test stocks for limit up/limit down. Implemented reference price calculator changes. Implemented software fix for rejected ‘A4’ quote inputs. Submitted as-of trade reports for January 3rd issue. Implemented new front end software version (fixes & enhancements). Implemented enhanced reference price calculator module. Implemented patch for memory growth issue on one server. Implemented patch for memory growth issue on three servers. Implemented new front end software version (memory growth issue). Implemented fix for LULD indicator value during trading pause. Changed UTP feed start of day time from 4:00am to 3:58am. Jkt 235001 PO 00000 Frm 00086 Fmt 4703 Sfmt 4703 E:\FR\FM\07OCN1.SGM 07OCN1 60530 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices Milestones April ................................................ May ................................................ June ............................................... July ................................................. August ............................................ September ..................................... October .......................................... November ...................................... December ...................................... Implemented Market Wide Circuit Breaker interface. Retired legacy Emergency Market Conditions Halt/Resume functions. Enabled limit up/limit down for 10 NASDAQ-listed tier 1 securities. Submitted additional as-of trade reports for January 3rd issue. Enabled limit up/limit down for 19 NASDAQ-listed tier 1 securities. Implemented information security recommendations for internal browser-based applications (monitoring and console). Enabled limit up/limit down for 65 NASDAQ-listed tier 1 securities. Enabled limit up/limit down for 77 NASDAQ-listed tier 1 securities. Enabled limit up/limit down for 97 NASDAQ-listed tier 1 securities. Implemented reference price calculator disaster recovery handling. Changed time source for servers running reference price calculators. Resized ISG column to handle full UQDF session close recap message. Disabled ‘‘Auto-run’’ feature on all SIP servers. Disabled hyper-threading on servers running reference price calculators. Implemented software fix for incorrect high price calculation resulting from trade correction. Manually failed over primary UQDF5 dissemination component to its backup after market close (to service pending retransmission requests). Updated multicast port restriction range on all SIP servers. Implemented LULD limit state release. Implemented July 2013 bid rate changes: • Quotes: 194,102mps • Trades: 36,102mps Completed a participant connectivity request. Implemented throttling statistics collection changes. Enabled limit up/limit down for 50 NASDAQ-listed tier 2 securities. Extended the price band calculation and dissemination period (9:30am–3:45pm); double-wide bands calculated from 9:30am–9:45am and 3:35pm–3:45pm. Rolled out UTDF connectivity fix. Enabled limit up/limit down for 10% of NASDAQ-listed tier 2 securities. Enabled limit up/limit down for an additional 30% of NASDAQ-listed securities. Enabled limit up/limit down for all eligible NASDAQ-listed securities. Implemented FEP emergency fix on quote server ‘A’ in primary site. Implemented FEP emergency fix on quote server ‘C’ and trade server ‘A’ in primary site. Replaced DIMM and motherboard for primary UQDF channel 5 server. Implemented FEP emergency fix on quote server ‘E’ and trade server ‘C’ in primary site. Implemented FEP emergency fix on all remaining quote and trade servers in primary site. Implemented FEP emergency fix on all servers in disaster recovery environment. Implemented capacity staging release. Implemented retransmission fix on UQDF channel 6 in primary site. Implemented retransmission fix on UQDF channels 4 and 5 in primary site. Implemented retransmission fix on UQDF channels through 3 in primary site. Implemented retransmission fix on all UQDF channels in disaster recovery environment. Replaced end-of-life switch chassis (‘A’ side). Replaced failed power supply for UTDF 5 primary server. Implemented a browser incompatibility fix for the SIP monitoring application. Implemented socket handler fixes and ACE library upgrade in all primary quote and trade BLUs in the primary production environment. Upgraded power supply and added a module to ‘B’ side switch. Implemented socket handler fixes and ACE library upgrade in all secondary quote BLUs in the primary production environment. Implemented socket handler fixes and ACE library upgrade in all secondary trade BLUs in the primary production environment. Implemented socket handler fixes and ACE library upgrade in all quote and trade BLUs in the disaster recovery environment. Implemented trade reporting enhancements (odd lots). 2012 February ......................................... asabaliauskas on DSK5VPTVN1PROD with NOTICES April ................................................ May ................................................ October .......................................... Implemented UQDF bandwidth increase to 175 Mbps. Implemented a connectivity request for BATS and BATS–Y. Implemented UTDF Capacity Phase III changes on UTDF channel 1. Implemented a connectivity request for NASDAQ. Implemented UTDF Capacity Phase III changes on UTDF channels 2–6. Implemented significant UQDF, UTDF, and OMDF message format changes in preparation for the Limit Up/ Limit Down and Market-Wide Circuit Breaker initiatives. Implemented support for participants’ Retail Liquidity programs. 2011 January .......................................... May ................................................ June ............................................... VerDate Sep<11>2014 17:15 Oct 06, 2014 UQDF bandwidth increased to 96 Mbps, approximately 175,000 messages per second (MPS). UTDF bandwidth increased to 33.5 Mbps, approximately 60,000 mps. Installed quote processing improvements for UQDF channel 1. Installed quote processing improvements for UQDF channel 2–6. Jkt 235001 PO 00000 Frm 00087 Fmt 4703 Sfmt 4703 E:\FR\FM\07OCN1.SGM 07OCN1 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices 60531 Milestones October .......................................... November ...................................... Implemented UQDF Capacity Phase III changes (throughput and latency improvements). Implemented a network-based end-to-end latency measurement solution. Implemented UQDF and UTDF symbol redistribution. 2010 January .......................................... February ......................................... March ............................................. April ................................................ May ................................................ June ............................................... July ................................................. August ............................................ September ..................................... October .......................................... November ...................................... December ...................................... Updated quote and trade capacity thresholds based on capacity study. Modified As Of trade processing for instruments trading in a round lot of less than 100 (e.g. preferred stock, convertible notes). Implemented dynamic throttling communication improvements. Implemented quote Front End enhancements to reduce CPU usage and increased throughput. Retired unused participant input lines. Facilitated a request from NASDAQ OMX PHLX for input connectivity. Facilitated a request from Bats–Y for input connectivity. Implemented UTDF improvements to increase throughput and reduce latency. Implemented single-stock circuit breaker halt reason codes. Activated participants EDGA Exchange, Inc. and EDGX Exchange, Inc. Updated quote and trade capacity thresholds based on capacity study. Implemented short sale trading restriction messaging. Enhanced market center-specific non-regulatory halts to support liquidity imbalances. Increased UTDF bandwidth to 12.5 Mbps in order to accommodate approximately 22,500 peak messages per second. Implemented daily peak traffic rate CSV files on SRA FTP site. Implemented daily peak traffic rate spreadsheet on SRA FTP site. Upgraded quote input servers in the primary production environment. Activated BATS–Y Exchange. Upgraded trade input servers in the primary production environment. Upgraded participant input servers in the disaster recovery environment. Implemented performance improvements in preparation for bandwidth increases in January 2011. Implemented ‘‘Consolidator’’ model performance improvements for UTDF. 2009 January .......................................... February ......................................... March ............................................. May ................................................ June ............................................... August ............................................ September ..................................... October .......................................... November ...................................... December ...................................... Expanded bandwidth for UQDF to handle 53,600 messages per second and UTDF to handle 8400 mps. Modified quarterly statistics report to include date and time of 5 minute peak messaging. Implemented aberrant/erroneous trade tool to allow the SIP operator to cancel or error large quantities of trades at a participant’s request. Enabled dynamic throttling for quotes. Started beta phase for penalty reports. Implemented a latency reduction enhancement for quotes and trades. Implemented SRA and ISG changes in preparation for expansion of UQDF and UTDF multicast channels. Expanded UQDF and UTDF from three to six multicast channels. Increased UQDF bandwidth to 56 Mbps in order to accommodate approximately 100,000 peak messages per second. Increased UTDF bandwidth to 8 Mbps in order to accommodate approximately 15,000 peak messages per second. Implemented three new participants (EDGA, EDGX, and BYX) with test quote and trade ports. Implemented metrics-collection software to improve performance monitoring. Implemented Front End performance enhancements to reduce CPU usage. Facilitated requests from EDGA and EDGX for input connectivity. Implemented further performance enhancements to reduce CPU usage. Completed setup of a NASDAQ-hosted website for the UTP Plan Administrator: https://www.utpplan.com/. 2008 January .......................................... February ......................................... March ............................................. asabaliauskas on DSK5VPTVN1PROD with NOTICES April ................................................ June ............................................... July ................................................. September ..................................... October .......................................... November ...................................... December ...................................... Support for new stock option ‘‘V’’ Trade modifier. Expanded UQDF bandwidth from 7.8 to 12.5 megabits per second (mbps) to support approximately 23,300 messages per second (mps). Increased the field size for participant inbound sequence number from 7 to 8 digits to support increasing messaging rates. Facilitated a request from BSX for input connectivity. Implemented change to support a new Emergency Market Condition quote resume message. Expanded UQDF bandwidth from 12.5 to 28.0 mbps to support approximately 48,000 mps. UTDF bandwidth was expanded from 3.0 to 4.0 mbps to support approximately 7,200 mps. Facilitated a request from BATS Exchange Inc. for input connectivity. Activation of the BATS Exchange as a new participant in UQDF and UTDF. Implemented a participant quote throttling mechanism to protect the system against instability and high latency during periods of heavy traffic, while guaranteeing each participant full access to its projected peak rate. Upgraded SQL database servers to SQL Server 2008 to enhance database performance. 2007 January .......................................... VerDate Sep<11>2014 17:15 Oct 06, 2014 Support one, two, and three character stock symbols for NASDAQ listed issuers, in addition to the currently used four- and five-character symbols. Jkt 235001 PO 00000 Frm 00088 Fmt 4703 Sfmt 4703 E:\FR\FM\07OCN1.SGM 07OCN1 60532 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices Milestones February ......................................... April ................................................ June ............................................... July ................................................. August ............................................ September ..................................... December ...................................... Regulation NMS compliance for quotes and trades— Quotes: Replace existing NASD quote message with new message that adds a new 1 byte FINRA appendage indicator. Supports a new appendage that identifies FINRA best bid Market Participant ID (MPID) and FINRA best offer MPID. Trades: Support new trade through exempt flag and new 4 byte sale condition field. This resulted in new message formats for long form trade reports, trade cancellations, and trade corrections. Introduce new Prior Day As-Of Trade message to allow reporting a trade that occurred prior to the current business day or to cancel an erroneously reported trade from a previous day. Facilitated a request from NSX for input connectivity. Facilitated a request from NSX for input connectivity. Implemented changes to allow Cash Settlement (C), Next Day (N), and Seller Sale Days Settlement (R) sale conditions for trade reports that are not exempt from the trade-through rule. Facilitated a request from ISE for input connectivity. Support for new Price Variation (H) and Cross (X) trade modifiers. Dissemination of the bid tick indicator is now inhibited. Enhancement to Quote Wipeout processing to improve processing times. ii. Significant Improvements in Latency and Capacity The Participants have made numerous investments to improve system speed and capacity, investments that are often overlooked by the industry. The Participants regularly monitor and review the performance of their SIP and make performance statistics available publicly on a quarterly basis. They make investments to upgrade technology, upgrades that enable the SIP to collect and disseminate the data ever more quickly, even as the number of quotes and trades continues to rise. The Participants will make future investments to handle the expected continued rise in message traffic, and at even faster data dissemination speeds. The information below shows that customers are getting the quote and trade Data Feeds faster, as the latency of consolidated tape quote and trade feeds has improved significantly in recent years. Average quote feed latency declined from over 5 milliseconds at the end of 2009 to 0.520 milliseconds in July 2014 and average trade feed latency declined from over 6 milliseconds at the end of 2009 to 0.565 milliseconds in July 2014, as shown below. Latency is measured from the time a message received from a Participant is timestamped by the system, to the time that processing the message is completed. Average quote latency (milliseconds) Month Dec 2009 ............................................................................................................................. Dec 2010 ............................................................................................................................. Dec 2011 ............................................................................................................................. Dec 2012 ............................................................................................................................. Dec 2013 ............................................................................................................................. Jan 2014 .............................................................................................................................. Feb 2014 .............................................................................................................................. Mar 2014 .............................................................................................................................. Apr 2014 .............................................................................................................................. May 2014 ............................................................................................................................. Jun 2014 .............................................................................................................................. Jul 2014 ............................................................................................................................... asabaliauskas on DSK5VPTVN1PROD with NOTICES iii. Significant Improvements in System Throughput, Measured by Messages Per Second Investments in hardware and software have increased processing power and enabled the systems to handle increasing throughput levels. This is measured by peak capacity messages per second and is monitored by looking at actual peak messages per second. SIP VerDate Sep<11>2014 17:15 Oct 06, 2014 Jkt 235001 throughput continues to increase in order to push out the increasing amounts of real-time quote and trade data. Given the constant rise in peak messages, the SIP significantly increased system capacity. As shown below, the system could handle peak quotes per second of approximately 175,000 in 2010 and 707,000 in 2014, an PO 00000 Frm 00089 Fmt 4703 Sfmt 4703 5.2497 4.3267 2.5378 1.6837 1.1700 1.129 1.282 1.160 0.894 0.564 0.589 0.520 Average trade latency (milliseconds) 6.2685 5.6796 7.8491 1.6328 1.2490 1.237 1.255 1.313 1.093 0.641 0.717 0.565 increase of more than 304 percent. The capacity for trades per second increased from 36,000 in 2010 to 393,000 in 2014, an increase of more than 990 percent. To better manage the rise in message traffic, the Participants anticipate that capacity planning will move from measuring messages per second to measuring messages per millisecond. BILLING CODE 8011–01–P E:\FR\FM\07OCN1.SGM 07OCN1 asabaliauskas on DSK5VPTVN1PROD with NOTICES VerDate Sep<11>2014 0 0 0 0 -!::> 0 0 0 0 en ,0 0 0 0 ~ 00 0 0 0 0 ~ 0 0 N ~ -!::> 0 0 0 0 0 0 0 0 0 0 0 :S:C::x:JC Jkt 235001 V> -l Q) -l OQO(ijo ;:x:J-n Q) Vl .-.-< (!) V> -lrti PO 00000 1/4/2011 4/4/2011 Frm 00090 7/4/2011 Vl -< V> rt (i3 3 3 ;::, )> )> OQ OQ OQ OQ a. .... (!) OQ .... Q) (!) 10/4/2011 .., U"l I Vl (!) ("') .... (!) OQ .... ~ ~ en oo 0 0 0 0 0 0 0 0 ;;?:S:~~~ ~o'B .., rt 0 0 " 1-;"'~Vl :;:;: V> OQ 000000000000000000000000 4/4/2o1o 7/4/2o1o 10/4/2010 rt \0 en J;' ..... tD OQ 1/4/2011 5. \0 ,o J;' OQ 3 OQ .... (!) OQ Q) o"- .... (!) ro < Fmt 4703 Sfmt 4703 4/4/2011 7/4/2011 IOQ IOQ 10/4/2011 I~ tD 4/4/2012 Q) .... ~ (!) .... ...... I;"' :S: g. ("') o'B 0 ;::, ~ (!) , ... tD E:\FR\FM\07OCN1.SGM s tD 1/4/2012 7/4/2012 10/4/2012 1/4/2013 en en 4/4/2013 OQ 7/4/2013 ~ 10/4/2013 OJ tD 10/4/2013 07OCN1 OJ ..... tD :;I tD ::s c. :;;:c:;;:cn~:;;:c:;;:c ~ OB gOB g ~ ~ OB gOB g c ~~~~rov,~~~~ roV>roV>;;;roroV>roV> -l{ij ftron-l{ij ft ri33 3 ~ri33 3 5.)> )> .-.g_)> OQ OQ OQ OQtD (!) OQ (!) OQ (!) OQ (!) OQ ~ 3 r+ (!) Q) r+ (!) Q) Q) )> <}, U"l ("') U"l ln (!) ~ (!) ~ ("') ~ lO >R 0 ~ ....... (!) ~ til ("') (!) )> -n V\ < en Q) 3 (") I I ~ ;:x:J""T1::x:J""T10.:~::x:J""T1;:x:J""T1 Vl"'M '"" v• n-1ro ~ n3 3 I I 1/4/2o1o -< ~ @ 10/4/2012 I ' I U"IOU"IOU"IOU"IOU"IOU"IOU"IOU"IOU"IOU"IOU"IOU"l 00000000000000000000000 00000000000000000000000 VJrl-'< ro ro ~ Q) (!) .., c -1 c [ -~·---~~--·-:;:;:;-§ ~ ~-~ ::H8--~~ ~~E~ ~ ~ ~ ~ ~ ....... (!) ..... ~ lOQ OQ <}, ("') (!) n) - I~ "s tD en en OJ OQ tD ~ OJ 4/4/2014 7/4/2014 ..... tD :;I tD 1/4/2014 10/4/2014 ::s c. Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices 17:15 Oct 06, 2014 N 0 1/4/2015 4/4/2015 60533 EN07OC14.024</GPH> EN07OC14.025</GPH> 60534 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices BILLING CODE 8011–01–C The average cost of last sale transaction reports also declined over that period. For instance, in 1998, the Plan Processor received reports for 155 million trades. By 2014, those numbers had increased to over 11 million per day or over 2.2 billion trades. At the same time, Professional Subscriber fees remained fairly constant and the introduction of a Nonprofessional Subscriber fee and an enterprise maximum reduced fees dramatically for whole categories of users and expanded data distribution to thousands of other users. Of course, these calculations exclude entirely the high indirect costs of producing consolidated data represented by the costs of each exchange collecting and contributing data to create the consolidated feeds. With respect to indirect costs, the Commission has previously noted that ‘‘any attempt to calculate the precise cost of market information presents severe practical difficulties.’’ 13 In commenting on the 1999 Concept Release, NYSE summarized many of the ‘‘severe practical difficulties’’ attendant to each Participant’s calculation of its data production and collection costs and we incorporate that discussion here.14 In 1997, the indirect costs of the Participants would have included the data production and collection costs of eight national securities exchanges and one national securities association. In 2014, that calculation would have to include the data production and collection costs of the 15 Participants, including 14 national securities exchanges and the Alternative Display Facility and two Trade Reporting Facilities that FINRA, the lone national securities association, maintains. In addition to those indirect costs, the costs of administering market data 12 Atradia, The Cost of Access to Real Time Pre and Post Trade Order Book Data in Europe, August 2010 (available at www.siia.net). 13 See SEC 1999 Concept Release on ‘‘Regulation of Market Information Fees and Revenues’’ (the ‘‘1999 Concept Release’’) located at https:// www.sec.gov/rules/concept/34–42208.htm. 14 See footnote 11 of letter from James E. Buck, Senior Vice President and Secretary, NYSE, April 10, 2000, located at https://www.sec.gov/rules/ concept/s72899/buck1.htm.> asabaliauskas on DSK5VPTVN1PROD with NOTICES VerDate Sep<11>2014 17:15 Oct 06, 2014 Jkt 235001 ups do not result in any additional revenues for the Participants; the vendors alone profit from them. f. Declining Unit Purchase Costs for Customers PO 00000 Frm 00091 Fmt 4703 Sfmt 4703 E:\FR\FM\07OCN1.SGM 07OCN1 EN07OC14.026</GPH> Despite consolidated tape investments in new data fields, additional capacity demands and latency improvements, users’ unit purchase costs for trade and quote data have declined significantly, increasing the value of the data they receive from their subscriptions. The amount of quote and trade data messages has increased significantly while fees have remained unchanged, as shown below for the 2000 to 2013 timeframe. The average purchase cost of Plan quotes has steadily declined since 2000. During that period, the average number of quotes per day increased over 2,500 percent between 2000 and mid-2014, rising from 4.3 million in 2000 to 112 million in 2014. As a result, the average unit purchase cost per one million quote messages for a customer incurring a monthly Professional Subscriber fee of $20 in 2000 or $23 in 2014 declined over 95 percent during this period, falling from $4.61 in 2000 to $0.20 in 2014. e. Vendor Fees Fees imposed by data vendors, whom the Commission does not regulate, account for a vast majority of the global market data fees incurred by the financial industry, according to Burton Taylor Associates, cited in a research study by Atradia.12 In addition to charging monthly subscription fees for end-users, market data vendors may apply significant administration markup fees on top of exchange market data fees. These mark-ups are not regulated and there is limited transparency into how the rates are applied. These mark- Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices distribution under the Plan have increased dramatically, as the administrator has rolled out new and enhanced tracking, data management, and invoice management systems to accommodate vendors and the industry and has enhanced its compliancereview capabilities. asabaliauskas on DSK5VPTVN1PROD with NOTICES 3. Adequate Constraints on Fees Constituent boards, customer control and regulatory mechanisms constrain fees for core market data now just as they have since Congress established the fair-and-reasonable standard in 1975. Under the Plan, NASDAQ, the listing market, typically takes the lead on pricing and administrative proposals, vetting new proposals with the other Participants, various Data Feed and endusers, and trade and industry groups, and making modifications which improve or reevaluate the original concept. Proposals are then taken to each Participant for approval. However, significant market data user and regulatory requirements constrain the Participant’s ability to simply impose fee changes, as demonstrated by the failed attempts earlier this year. The governing body of each Participant consists of representatives of constituent firms and a large quotient of independent directors. The Participants’ constituent board members have the ultimate say on whether the UTP Plan Operating Committee should submit fee proposals to the Commission and whether the costs of operating the markets and the costs of the market data function are fairly allocated among market data users. That is, the users of market data and non-industry representatives who sit on Participant boards get to determine whether to support market data fee proposals. They also get to determine how the various types of data users should pay their fair share and they make decisions about funding technical infrastructure investments needed to receive, process and safe-store the orders, quotations and trade reports that give rise to the data. This cost allocation by consensus is buttressed by Commission review and is superior to cost-based rate-making. Indeed, in recent decades, Congress and federal agencies, including the Commission, have increasingly moved away from intrusive, cost-based ratemaking in favor of more marketoriented approaches to pricing. For example, it was the intent of Congress in creating the national market system to rely on competitive forces, where possible, to set the price of market VerDate Sep<11>2014 17:15 Oct 06, 2014 Jkt 235001 information.15 Consistent with this intent, an Advisory Committee appointed by the Commission in 2001 to review market data issues concluded that ‘‘the ‘public utility’ cost-based ratemaking approach is resourceintensive, involves arbitrary judgments on appropriate costs, and creates distortive economic incentives.’’ 16 In response, and consistent with the purposes of the Exchange Act, the Commission has increasingly permitted competitive forces to determine the prices of market data fees.17 This conclusion mirrors the experience of other federal agencies that have come to reject cost-of-service ratemaking as a cumbersome and impractical process that stifled, rather than fostered, competition and innovation.18 Market forces are plainly adequate to constrain the prices for market data proposed herein by the Plan and its Participants. Constituent Board members are the Participants’ market data customers. When a critical mass of them voices a point of view, they can direct the Participants how to act. This is part of what motivated the Participants to propose the 2015 Fee Changes. The Commission’s process, including public comment as appropriate and when permitted by the statutory language, then acts as an additional constraint on pricing. Also, developments in technology make possible another important constraint on market data prices for core data: There is nothing to prevent one or more vendors, broker-dealers or other entities from gathering prices and quotes across all Participants and creating a consolidated data stream that would compete with the Plans’ data streams. The technology to consolidate multiple, disparate data streams is readily available, and multiple markets have already introduced products that compete with core data. 15 See Conference Report, H.R. Rep. No. 94–229, 94th Cong., 1st Sess. 92 (1975), at 92 (‘‘It is the intent of the conferees that the national market system evolve through the interplay of competitive forces as unnecessary regulatory restrictions are removed.’’). 16 Report of the Advisory Committee on Market Information: A Blueprint for Responsible Change, at § VII.D.3 (SEC Sept. 14, 2001); see also Stephen G. Breyer, Analyzing Regulatory Failure: Mismatches, Less Restrictive Alternatives, and Reforms, 92 Harv. L. Rev. 547, 565 (1979) (‘‘[I]nsofar as one advocates price regulation . . . as a ‘cure’ for market failure, one must believe the market is working very badly before advocating regulation as a cure. Given the inability of regulation to reproduce the competitive market’s price signals, only severe market failure would make the regulatory game worth the candle.’’). 17 See generally NetCoalition v. SEC, 615 F.3d 525, 533–35 (D.C. Cir. 2010). 18 See, e.g., Elizabethtown Gas Co. v. FERC, 10 F.3d 866, 870 (D.C. Cir. 1993). PO 00000 Frm 00092 Fmt 4703 Sfmt 4703 60535 K. Method and Frequency of Processor Evaluation No Change. L. Dispute Resolution No Change. II. Rule 601(a) A. Equity Securities for Which Transaction Reports Shall Be Required by the Plan No Change. B. Reporting Requirements No Change. C. Manner of Collecting, Processing, Sequencing, Making Available and Disseminating Last Sale Information No Change. D. Manner of Consolidation No Change. E. Standards and Methods Ensuring Promptness, Accuracy and Completeness of Transaction Reports No Change. F. Rules and Procedures Addressed to Fraudulent or Manipulative Dissemination No Change. G. Terms of Access to Transaction Reports See Item I(A). H. Identification of Marketplace of Execution No Change. III. Solicitation of Comments The Commission seeks general comments on Amendment No. 32. Interested persons are invited to submit written data, views, and arguments concerning the foregoing, including whether the proposal 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 S7– 24–89 on the subject line. Paper Comments • Send paper comments in triplicate to Brent J. Fields, Secretary, Securities and Exchange Commission, 100 F Street NE., Washington, DC 20549–1090. All submissions should refer to File Number S7–24–89. This file number should be included on the subject line if email is used. To help the E:\FR\FM\07OCN1.SGM 07OCN1 60536 Federal Register / Vol. 79, No. 194 / Tuesday, October 7, 2014 / Notices Commission process and review your comments more efficiently, please use only one method. The Commission will post all comments on the Commission’s Web site (https://www.sec.gov/rules/ sro.shtml). Copies of the submission, all written statements with respect to the proposed Plan Amendment that are filed with the Commission, and all written communications relating to the proposed Plan Amendment between the Commission and any person, other than those that may be withheld from the public in accordance with the provisions of 5 U.S.C. 552, will be available for Web site viewing and printing in the Commission’s Public Reference Room on official business days between the hours of 10:00 a.m. and 3:00 p.m. Copies of the Amendments also will be available for inspection and copying at the principal office of NASDAQ. 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 S7–24–89 and should be submitted on or before October 28, 2014. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.19 Kevin M. O’Neill, Deputy Secretary. [FR Doc. 2014–23838 Filed 10–6–14; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–73278; File No. SR–CTA/ CQ–2014–03) Consolidated Tape Association; Notice of Filing and Immediate Effectiveness of the Twenty-First Charges Amendment to the Second Restatement of the CTA Plan and Twelfth Charges Amendment to the Restated CQ Plan asabaliauskas on DSK5VPTVN1PROD with NOTICES October 1, 2014. Pursuant to Section 11A of the Securities Exchange Act of 1934 (‘‘Act’’),1 and Rule 608 thereunder,2 notice is hereby given that on September 12, 2014, the Consolidated Tape Association (‘‘CTA’’) Plan and Consolidated Quotation (‘‘CQ’’) Plan participants (‘‘Participants’’) 3 filed with 19 17 CFR 200.30–3(a)(27). U.S.C. 78k–1. 2 17 CFR 242.608. 3 Each participant executed the proposed amendment. The Participants are: BATS Exchange, 1 15 VerDate Sep<11>2014 17:15 Oct 06, 2014 Jkt 235001 the Securities and Exchange Commission (‘‘Commission’’) a proposal to amend the Second Restatement of the CTA Plan and Restated CQ Plan (collectively, the ‘‘Plans’’).4 The amendments (‘‘2014 Fee Amendments’’) respond to long-term changes in datausage trends. In formulating the proposed fee changes, the Participants formed a subcommittee to study the optimum allocation of fees among market data users and consulted with the industry representatives that sit on the Plans’ Advisory Committees and with other industry participants. The Participants also met with the Securities Industry and Financial Markets Association (‘‘SIFMA’’). Pursuant to Rule 608(b)(3)(i) under Regulation NMS,5 the Participants designated the 2014 Fee Amendments as establishing or changing a fee or other charge collected on their behalf in connection with access to, or use of, the facilities contemplated by the Plans. As a result, the 2014 Fee Amendments became effective upon filing with the Commission. At any time within 60 days of the filing of the 2014 Fee Amendments, the Commission may summarily abrogate the 2014 Fee Amendments and require that the 2014 Fee Amendments be refiled in accordance with paragraph (a)(1) of Rule 608 and reviewed in accordance with paragraph (b)(2) of Rule 608, if it appears to the Commission that such action is necessary or appropriate in the public interest, for the protection of investors, or the maintenance of fair and orderly markets, to remove impediments to, and perfect the mechanisms of, a Inc. (‘‘BATS’’), BATS–Y Exchange, Inc. (BATS–Y), Chicago Board Options Exchange, Incorporated (‘‘CBOE’’), Chicago Stock Exchange, Inc. (‘‘CHX’’), EDGA Exchange, Inc. (‘‘EDGA’’), EDGX Exchange, Inc. (‘‘EDGX’’), Financial Industry Regulatory Authority, Inc. (‘‘FINRA’’), International Securities Exchange, LLC (‘‘ISE’’), NASDAQ OMX BX, Inc. (‘‘Nasdaq BX’’), NASDAQ OMX PHLX, Inc. (‘‘Nasdaq PSX’’), Nasdaq Stock Market LLC (‘‘Nasdaq’’), National Stock Exchange (‘‘NSX’’), New York Stock Exchange LLC (‘‘NYSE’’), NYSE MKT LLC (‘‘NYSE MKT’’), and NYSE Arca, Inc. (‘‘NYSE Arca’’). 4 See Securities Exchange Act Release Nos. 10787 (May 10, 1974), 39 FR 17799 (May 20, 1974) (declaring the CTA Plan effective); 15009 (July 28, 1978), 43 FR 34851 (August 7, 1978) (temporarily authorizing the CQ Plan); and 16518 (January 22, 1980), 45 FR 6521 (January 28, 1980) (permanently authorizing the CQ Plan). The most recent restatement of both Plans was in 1995. The CTA Plan, pursuant to which markets collect and disseminate last sale price information for nonNASDAQ listed securities, is a ‘‘transaction reporting plan’’ under Rule 601 under the Act, 17 CFR 242.601, and a ‘‘national market system plan’’ under Rule 608 under the Act, 17 CFR 242.608. The CQ Plan, pursuant to which markets collect and disseminate bid/ask quotation information for listed securities, is a ‘‘national market system plan’’ under Rule 608 under the Act, 17 CFR 242.608. 5 17 CFR 242.608(b)(3)(i). PO 00000 Frm 00093 Fmt 4703 Sfmt 4703 national market system or otherwise in furtherance of the purposes of the Act. The Commission is publishing this notice to solicit comments from interested persons on the proposed 2014 Fee Amendments. I. Rule 608(a) A. Purpose of the Amendments 1. In General The Participants made significant changes to the fee schedule effective as of September 1, 2013.6 Those changes compressed the long-standing 14-tier Network A device rate schedule into just four tiers, consolidated the Plans’ eight fee schedules into one, updated that fee schedule, and realigned the Plans’ charges more closely with the services the Plans provide (collectively, the ‘‘2013 Fee Changes’’). They also complied with industry requests that the participants in the several national market system plans strive to harmonize fees under those plans. In submitting the 2013 Fee Changes to the Commission, the Participants represented that the changes would not materially change the revenues that the Participants collect under the Plans. However, since the 2013 Fee Changes were implemented in September 2013, Network A revenues have declined 5.43 percent and Network B revenues have declined 11.13 percent. Prior to the 2013 Fee Changes, the Participants last filed a fee structure change in 1986. However, as the 2013 Fee Amendments described, significant change has characterized the industry, stemming in large measure from technological advances, the advent of trading algorithms and automated trading, new investment patterns, new securities products, unprecedented levels of trading, decimalization, internationalization and developments in portfolio analysis and securities research. The 2014 Fee Amendments would realign the Plans’ charges more closely with the ways in which data recipients consume market data today. Although professional subscriber display device fees still account for a majority of Network A and Network B revenues, the industry’s reliance on professional subscriber display devices continues to decline and the gap between professional subscriber device rates and nonprofessional subscriber fees remains large. The proposed fee changes would reduce the rates that professional subscribers pay for each of their display 6 See Securities Exchange Act Release No. 70010 (July 19, 2013), 78 FR 44984 (July 25, 2013) (the ‘‘2013 Fee Amendments’’). E:\FR\FM\07OCN1.SGM 07OCN1

Agencies

SECURITIES AND EXCHANGE COMMISSION

[Federal Register Volume 79, Number 194 (Tuesday, October 7, 2014)]
[Notices]
[Pages 60522-60536]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-23838]

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

SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-73279; File No. S7-24-89]

Joint Industry Plan; Notice of Filing and Immediate Effectiveness
of Amendment No. 33 to the Joint Self-Regulatory Organization Plan
Governing the Collection, Consolidation and Dissemination of Quotation
and Transaction Information for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading Privileges Basis Submitted by the BATS
Exchange, Inc., BATS Y-Exchange, Inc., Chicago Board Options Exchange,
Incorporated, Chicago Stock Exchange, Inc., EDGA Exchange, Inc., EDGX
Exchange, Inc., Financial Industry Regulatory Authority, Inc.,
International Securities Exchange LLC, NASDAQ OMX BX, Inc., NASDAQ OMX
PHLX LLC, Nasdaq Stock Market LLC, National Stock Exchange, Inc., New
York Stock Exchange LLC, NYSE MKT LLC, and NYSE Arca, Inc.

October 1, 2014.
Pursuant to Section 11A of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 608 thereunder,\2\ notice is hereby given that
on September 12, 2014, the operating committee (``Operating Committee''
or ``Committee'') \3\ of the Joint Self-Regulatory Organization Plan
Governing the Collection, Consolidation, and Dissemination of Quotation
and Transaction Information for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading Privilege Basis (``Nasdaq/UTP Plan''
or ``Plan'') filed with the Securities and Exchange Commission
(``Commission'') an amendment to the Plan.\4\ This

[[Page 60523]]

amendment represents Amendment No. 33 (``Amendment No. 33'') to the
Plan and modifies the Plan's fee schedule without the expectation of
incremental revenue to the Participants. The Participants voted in
accordance with the requirements of the Plan \5\ to make the following
changes to the Plan's fee schedule: (1) Decrease the Professional
Subscriber Fee from $23 to $22 per month per interrogation device; (2)
Increase the per-query charge from $0.005 to $0.0075; and (3) Establish
Non-Display fees for three categories of Non-Display use. These ``2015
Fee Changes'' respond to long-term changes in data-usage trends. In
formulating the proposed fee changes, the Participants formed a
subcommittee to study trends among market data users and consulted with
the industry representatives that sit on the Plans' Advisory Committees
and with other industry Participants. The Participants also met with
the Securities Industry and Financial Markets Association (``SIFMA'').
---------------------------------------------------------------------------

\1\ 15 U.S.C. 78k-1.
\2\ 17 CFR 242.608.
\3\ The Plan Participants (collectively, ``Participants'') are
the: BATS Exchange, Inc.; BATS Y-Exchange, Inc.; Chicago Board
Options Exchange, Incorporated; Chicago Stock Exchange, Inc.; EDGA
Exchange, Inc.; EDGX Exchange, Inc.; Financial Industry Regulatory
Authority, Inc.; International Securities Exchange LLC; NASDAQ OMX
BX, Inc.; NASDAQ OMX PHLX LLC; Nasdaq Stock Market LLC; National
Stock Exchange, Inc.; New York Stock Exchange LLC; NYSE MKT LLC; and
NYSE Arca, Inc.
\4\ The Plan governs the collection, processing, and
dissemination on a consolidated basis of quotation information and
transaction reports in Eligible Securities for each of its
Participants. This consolidated information informs investors of the
current quotation and recent trade prices of Nasdaq securities. It
enables investors to ascertain from one data source the current
prices in all the markets trading Nasdaq securities. The Plan serves
as the required transaction reporting plan for its Participants,
which is a prerequisite for their trading Eligible Securities. See
Securities Exchange Act Release No. 55647 (April 19, 2007), 72 FR
20891 (April 26, 2007).
\5\ Section IV(C)(2) of the Plan provides that ``the affirmative
vote of two-thirds of the Participants entitled to vote shall be
necessary to'' establish new fees or increase existing fees relating
to Quotation Information and Transaction Reports in Eligible
Securities. A unanimous affirmative vote of the Operating Committee
was conducted on August 13, 2014 and recorded in the official
minutes of that meeting.
---------------------------------------------------------------------------

Pursuant to Rule 608(b)(3)(i) under Regulation NMS, the
Participants hereby designate the proposed Amendment 33 as establishing
or changing a fee or other charge collected on their behalf in
connection with access to, or use of, the facilities contemplated by
the Plans. As a result, Amendment 33 becomes effective upon filing with
the Commission. The changes will be implemented on January 1, 2015.
At any time within 60 days of the filing of Amendment No. 33, the
Commission may summarily abrogate Amendment No. 33 and require that the
Amendment be refiled in accordance with paragraph (a)(1) of Rule 608
and reviewed in accordance with paragraph (b)(2) of Rule 608, if it
appears to the Commission that such action is necessary or appropriate
in the public interest, for the protection of investors, or the
maintenance of fair and orderly markets, to remove impediments to, and
perfect the mechanisms of, a national market system or otherwise in
furtherance of the purposes of the Act. The Commission is publishing
this notice to solicit comments from interested persons.

I. Rule 608(a)

A. Purpose of the Amendments

(a) Background
The Participants made several changes to the fee schedule effective
as of January 1, 2014.\6\ Those changes introduced reporting by
redistributors on a ``net'' basis, increased the Professional
Subscriber device fee, the Enterprise Maximum for Nonprofessional
Subscriber usage, and the Direct Access fee, and established Real-Time
and Delayed Redistributor fees (collectively, the ``January 2014 Fee
Changes''). They also complied with industry requests that the
participants in the several national market system plans strive to
harmonize fee structures under those plans. In submitting the January
2014 Fee Changes to the Commission, the Participants identified past
attrition and the expectation of continued attrition in the reporting
and consumption of consolidated market data. They anticipated that the
January 2014 Fee Changes would generate enough revenue to offset the
revenue declines resulting from that attrition. Actual experience with
the January 2014 Fee Changes shows that, for the first six months of
2014, revenues under the Plan rose five percent relative to the second
half of 2013, but not enough to recover from attrition losses over the
past three years.
---------------------------------------------------------------------------

\6\ See Release No. 34-70953; File No. S7-24-89 (December 4,
2013), https://www.gpo.gov/fdsys/pkg/FR-2013-12-04/html/2013-28970.htm.
---------------------------------------------------------------------------

Prior to the January 2014 Fee Changes, the Participants last
increased the Professional Subscriber device fees in 1997. Since then,
significant change has characterized the industry, stemming in large
measure from technological advances, the advent of trading algorithms
and automated trading, new investment patterns, new securities
products, unprecedented levels of trading, decimalization,
internationalization and developments in portfolio analysis and
securities research. Measures of Plan inputs and outputs have expanded
dramatically, including the number of exchange participants, messages
per period, message speed, and total shares and dollar volume of
trading. Related measures of value to the industry have improved and
related industry costs have fallen, including the cost per message, the
cost per trade, and the cost per share and dollar volume traded.
The 2015 Fee Changes would realign the Plans' fees more closely
with the ways in which Data Feed Recipients consume market data today.
Although Professional Subscriber Display Device fees still account for
a majority of Plan revenues, the industry's use of Professional
Subscriber Display Devices continues to decline and the gap between
Professional Subscriber device rates and Nonprofessional Subscriber
fees remains large. The proposed fee changes would reduce the rates
that Professional Subscribers pay for each of their Display Devices. To
offset the revenue losses attributable to the reduction in Professional
Subscriber device rates, the Participants propose to establish fees for
Non-Display consumption of market data and to raise the fee payable in
respect of per-quote services.
The 2015 Fee Changes also move in the direction of continuing to
harmonize fee structures under the Plan with fee structures under the
CTA Plan, the CQ Plan and the OPRA Plan. This would further reduce
administrative burdens for broker-dealers and other market data users
and further simplify usage reporting and calculations related to the
unit of count.
While the 2015 Fee Changes will rebalance the fee schedule, the
Participants anticipate that the proposed 2015 Fee Changes would have
only a small impact on Plan revenues, increasing those revenues by
approximately two to three percent over the prior year. Of course, that
number is hard to estimate, given the uncertainties of Non-Display use
revenues and declining Level 1 Professional populations.
(b) The Proposed Changes
i. Professional Subscriber Fee
Prior to the January 2014 Fee Changes, the Professional Subscriber
device fee had remained at $20 per month since 1997. The January 2014
Fee Changes raised it to $23 per month. Amendment 33 would reduce the
Professional Subscriber device fee from $23 per month to $22 per month.
At $22 per month, the increase amounts to an increase of one-half of
one percent per year over a 17-year period. During that period, the
amount of market data and the categories of information distributed
through the UTP Level 1 Service have grown dramatically. Since then,
the securities information processor under the Plan (the ``SIP'') has
made hundreds of modifications to the UTP Trade Data Feed and the UTP
Quotation Data Feed (``UQDF'') to keep up with changes in market
structure, regulatory requirements and trading needs. These
modifications have added elements such as new messages, new fields, and
new values within designated fields to the UTP Level 1 Service. These

[[Page 60524]]

modifications have caused the UTP Level 1 Service to support such
industry developments as Regulation NMS, decimalization, limit up/limit
down, and many other changes.
In addition to the many modifications, the number of quotes and
trades that the Participants have reported under the Plan has grown
dramatically. As an example of the growth in quotes distributed over
the UTP Level 1 Service, from the fourth quarter of 2010 to the second
quarter of 2014, UTP UQDF Peak Quotes Per Second has increased by 130%
from 119,347 to 273,996. Over that period, the Average Quotes Per Day
has increased more than 32% to 112,621,874 [www.utpplan.com].

----------------------------------------------------------------------------------------------------------------
Difference
Tape C quote metrics Q2 2014 Q4 2010 (percent)
----------------------------------------------------------------------------------------------------------------
Peak Quotes Per Second.......................................... 273,996 119,347 130
Avg. Quotes Per Day............................................. 112,621,874 85,402,614 32
Avg. Quote Latency (ms)......................................... 0.59 4.5 -87
----------------------------------------------------------------------------------------------------------------

As an example of the growth in trades distributed over the UTP
Level 1 Service, from the fourth quarter of 2010 to the second quarter
of 2014, UTP UTDF Peak Trades Per Second has increased by a 221% from
30,292 to 97,232. Over that period, the Average Trades Per Day has
increased more than 76% to 11,027,210 [www.utpplan.com].

----------------------------------------------------------------------------------------------------------------
Difference
Tape C trade metrics Q2 2014 Q4 2010 (percent)
----------------------------------------------------------------------------------------------------------------
Peak Trades Per Second.......................................... 97,232 30,292 221
Avg. Trades Per Day............................................. 11,027,210 6,251,074 76
Avg. Quote Latency (ms)......................................... 0.72 6 -88
----------------------------------------------------------------------------------------------------------------

At the same time, Professional Subscribers' usage of Level 1 data
has been declining:
[GRAPHIC] [TIFF OMITTED] TN07OC14.023

Professional Subscriber fees collected have declined as well. For
example, as of September 30, 2011, the Plan's 382,862 Professional
Subscribers paid $7,657,240 per month.\7\ As of September 30, 2012, the
Plan's 351,106 Professional Subscribers paid $7,022,120. As of
September 30, 2013, the Plan's 295,192 Professional Subscribers paid
$5,903,890. As of June, 2014, the Plan's 259,728 Professional
Subscribers paid only $5,973,744 (which reflects the rate increase
established in the January 2014 Fee Changes). In sum, monthly revenues
from Professional Subscriber device fees for June 2014 remain more than
$1,683,486 below the level of Professional usage fees collected in
September 2011, notwithstanding the rate increase established in the
January 2014 Fee Changes.
---------------------------------------------------------------------------

\7\ Professional Subscriber counts are calculated and published
quarterly and posted on utpplan.org. The latest quarterly figures
reflect a 15 percent annual decline in Professional Subscribers. See
https://www.utpplan.com/.
---------------------------------------------------------------------------

Fees for UTP Level 1 compare favorably to fees for comparable
Network A and B data. Under the CT/CQ Network A tiered structure, a
firm reports how many Display Devices the Professional Subscriber
employs; that number then is used to determine the tier within which
the firm falls. Until last September, the Network A fees for
Professional Subscribers ranged from $18.75 per device for firms
employing Professional Subscribers who use more than 10,000 devices to
$127.25 per device for an individual Professional Subscriber. In June
of 2013, Network A lowered that range to $20 to $50 per device. The
Participants understand that Network A intends to lower that range in
the near future to $19 to $45.\8\ Also

[[Page 60525]]

in June of 2013, Network B combined the fees payable for a Professional
Subscriber's receipt of quotation information and last sale price
information and set the combined monthly fee at $24 per month. The
combined $24 rate reduced costs for most Professional Subscribers, with
the exception of a small number of Data Feed Recipients who receive
last sale or quotation information, but not both. The Participants
understand that Network B intends to lower that rate in the near future
from $24 to $23. Under the OPRA Plan, the device fee is currently $27
per month.
---------------------------------------------------------------------------

\8\ Specifically, the Network A monthly fees for Professional
Subscriber devices would become $45 per month for users with 1 or 2
devices, $27 per month for users with 3 to 999 devices, $23 per
month for users with 1,000 to 9,999 devices, and $19 per month for
users with 10,000 or more devices.
---------------------------------------------------------------------------

The Participants anticipate that the revenue losses that would
result from the reduction in Professional Subscriber device rate from
$23 to $22 would be offset by the other proposed amendments to the fee
schedule and that, in the aggregate, the 2015 Fee Changes would not
result in a material change in overall revenues under the Plans.
ii. Per-Query Fee
As an alternative to monthly professional subscriber and
nonprofessional subscriber fees, a vendor may respond to end-user
queries for quote and trade information and pay a fee for each such
response. The Participants first established the per-query fee in 1992
as a pilot at $0.015 per query. In 1995, it was noted that the Nasdaq/
UTP per-query fee was three times that of the Network A and Network B
counterparts. Subsequently, the Nasdaq/UTP per-query fee was made a
permanent part of the fee schedule and was lowered to $0.01 per query
to be more in line with Networks A and B. In April 1999, a pilot at a
reduced rate of $.005 per query was filed and in April 2001, it was
approved as the permanent fee structure. The fee has remained at $0.005
per query ever since. The Participants are now proposing to increase
the fee to $0.0075 per query. This increase would help to offset the
revenue loss that will result from the decrease in the Professional
Subscriber device fee.
Effective June 1, 2013, the Participants in the OPRA Plan increased
their per-query fee to $0.0075.\9\ In addition, the Participants
understand that the Network A Participants and the Network B
Participants are contemplating similar increases to $0.0075 per query
under the CTA Plan and the CQ Plan.
---------------------------------------------------------------------------

\9\ See Release No. 34-69448; File No. SR-OPRA-2013-01 (April
25, 2013), https://www.sec.gov/rules/sro/nms/2013/34-69448.pdf.
---------------------------------------------------------------------------

The Participants note that increasing the per-query fee to $0.0075
would continue to harmonize the per-query fee structure under the
national market system plans and would contribute toward restoring a
more appropriate balance of fees in recognition of the declining
significance of revenues derived from Professional Subscriber device
fees. The increase in revenues resulting from the proposed increase in
the per-query fees would represent an appropriate contribution for that
service to covering the overall costs of the Participants in
collecting, processing and distributing market data under the Plans.
iii. Non-Display Fees
A. Background. Changes in regulation and advances in technology
have had an impact on market data usage in recent years. Automated and
algorithmic trading has proliferated, the numbers of quotes and trades
have increased significantly and Data Feeds have become exponentially
faster. Today, Non-Display Devices consume large amounts of data, and
can process the data far more quickly than any human being looking at a
terminal. Today, such devices are responsible for a majority of
trading. Many firms incorporate Non-Display data into trading
applications, without the need for their employees to have widespread
access to the data. It enables them to generate considerable profits.
These changes in market data consumption patterns show that Non-
Display use now constitutes a significant portion of the industry's
consumption of market data and that market data adds considerable value
to many firms' business model.
As a result, the Participants have determined that the
establishment of fees for Non-Display uses of data, along with a
reduction in the Professional Subscriber device fee and the increase in
the per-query fee, would provide an equitable allocation of fees to the
industry, would facilitate the administration of Non-Display uses of
market data and would equitably reflect the value of Non-Display and
display data usage. The Participants believe that the proposed fees
reflect the value of the data provided and note that Non-Display fees
have become commonplace in the industry. Several exchanges impose Non-
Display fees for their proprietary data products, as does the OPRA
Plan. In addition, the Participants understand that the Network A
Participants and the Network B Participants are also contemplating the
establishment of fees for Non-Display uses of data.
B. Definition of Non-Display Use. For purposes of the proposed
fees, Non-Display use refers to accessing, processing or consuming
data, whether received via direct and/or redistributor Data Feeds, for
a purpose other than solely facilitating the delivery of the data to
the Data Feed Recipient's display or for the purpose of further
internally or externally redistributing the data. Further
redistribution of the data refers to the transportation or
dissemination to another server, location or device. In instances where
the Data Feed Recipient is using the data in Non-Display to create
derived data and use the derived data for the purposes of solely
displaying the derived data, then the Non-Display fee schedule does not
apply, but the data may be fee liable under the regular fee schedule.
C. Categories of Non-Display Use. The Participants recognize three
types of Non-Display Uses as follows:
(a) The Non-Display fee for Electronic Trading Systems applies when
a datafeed recipient makes a Non-Display of data in an electronic
trading system, whether the system trades on the datafeed recipient's
own behalf or on behalf of its customers. This fee includes, but is not
limited to, use of data in any trading platform(s), such as exchanges,
alternative trading systems (``ATS's''), broker crossing networks,
broker crossing systems not filed as ATS's, dark pools, multilateral
trading facilities, and systematic internalization systems.
An organization that uses data in electronic trading systems must
count each platform that uses data on a non-display basis. For example,
an organization that uses quotation information for the purposes of
operating an ATS and also for operating a broker crossing system not
registered as an ATS would be required to pay two Electronic Trading
System fees.
(b) Non-Display Enterprise Licenses. The Participants recognize two
types of Non-Display Licenses as follows:
(i) The Non-Display fee for Internal Use applies when a datafeed
recipient's Non-Display usage is on its own behalf (other than for
purposes of an electronic trading system).
(ii) The Non-Display fee for External Use applies when a datafeed
recipient's Non-Display usage is on behalf of its customers (other than
for purposes of an electronic trading system).
The two types of Non-Display Enterprise Licenses include, but are
not limited to, use of data for automated order or quote generation
and/or order

[[Page 60526]]

pegging, price referencing for algorithmic trading, price referencing
for smart order routing, operations control programs, investment
analysis, order verification, surveillance programs, risk management,
compliance or portfolio valuation.
D. Examples of Non-Display Uses of Market Data. Examples of the
Non-Display Electronic Trading System Fee include, but are not limited
to:

Any trading in any asset class
Exchanges
Alternative trading systems (ATSs)
Broker crossing networks
Broker crossing systems not filed as ATSs
Dark pools
Multilateral trading facilities
Systematic internalization systems
Examples of Non-Display Use for Non-Display fee for Internal Use
and Non-Display fee for External Use include, but are not limited to:

Automated order or quote generation and/or order pegging
Price referencing for algorithmic trading
Price referencing for smart order routing
Operations control programs
Investment analysis
Order verification
Surveillance programs
Risk management
Compliance
Portfolio valuation
E. Non-Display Fee. For each of type of fee, the Participants
propose to impose a monthly fee of $3500 for the Non-Display use of the
combined last sale price information and quotation information.
By way of comparison, the Participants understand that Network A
intends to establish separate monthly Non-Display Fees of $2,000 for
last sale prices plus $2,000 for quotation information and that Network
B intends to establish monthly Non-Display Fees of $1,000 for last sale
prices plus $1,000 for quotation information.
In addition, the Non-Display fee for Electronic Trading Systems
applies once to each Data Feed Recipient's account for each of the
firm's electronic trading systems. If a firm uses quotes solely to
operate a dark pool for its customers' orders and makes no other Non-
Display use of market data, it would pay the Non-Display fee for
Electronic Trading Systems (and not the other Non-Display Licenses). If
that firm also uses quotes to operate an ATS, but still makes no other
Non-Display uses of market data, it would pay two Non-Display fees for
Electronic Trading Systems fees (and no other Non-Display Licenses).
The fees for Non-Display Enterprise Licenses are enterprise
licenses for the Non-Display uses that fall within either Internal or
External usage. Only one Non-Display Enterprise License fee applies to
each Data Feed Recipient's account regardless of the number of Non-
Display uses of data the firm makes within that category (either
Intenral or External). For instance, if a firm makes Non-Display uses
of data to analyze investments for its own portfolio, to value that
portfolio, to verify the firm's proprietary orders and to run
compliance programs for the firm, the firm would pay only one Non-
Display fee for Internal Use fee. Similarly, if a firm makes Non-
Display uses of data to analyze investments for customers, to verify
customer orders, to surveil the market it conducts for customers, to
provide risk management services to customers and to value its
customers' portfolios, the firm would pay only one Non-Display fee for
External Use fee. Finally, if a firm makes Non-Display uses of data to
analyze investments for its own portfolio and to analyze investments
for customers, the firm would pay both the Non-Display fee for Internal
Use and the Non-Display fee for External Use fee.
The fees apply to each of a Data Feed Recipient's accounts that
uses market data for Non-Display purposes. The Participants would only
invoice Data Feed Recipients that make Non-Display uses of real-time
market data on a monthly basis.
A firm may use data for each of Non-Display fees and thereby
subject itself to the Non-Display fee for each category. For example,
if a broker-dealer operates an ATS (Non-Display fee for Electronic
Trading Systems), operates a trading desk to trade with its own capital
(Non-Display fee for Internal Use), and operates a separate trading
desk to trade on behalf of its clients (Non-Display fee for External
Use), then the Non-Display fee would apply in respect of all three
categories. If, in addition to the ATS, the firm also operates a broker
crossing system not registered as an ATS, then two Non-Display fees for
Electronic Trading Systems would apply in respect of each market data
product. That is, a firm must count each electronic trading system that
uses data for payment of the Non-Display fee for Electronic Trading
Systems.
F. Administrative Requirements for Non-Display Uses. In response to
feedback received from SIFMA, the Participants seek to minimize the
administrative burden attendant to Non-Display fees and, therefore,
have determined not to impose a monthly reporting requirement. Instead,
the Participants would require each recipient of a real-time Data Feed
to make an annual declaration of its Non-Display use to the
Participants. They would require each Data Feed Recipient to complete
and submit the declaration upon its initial receipt of a Data Feed
under the UTP Plan. In addition, if a Data Feed Recipient's use of data
changes at any time after the Data Feed Recipient submits its
declaration or annual confirmation or update, the Participants would
require the Data Feed Recipient to update its declaration at the time
of the change to reflect the change of use.
The Participants believe that use of the declaration would keep
administrative burdens at a minimum, as SIFMA requested.
The Participants reserve the rights:
(a) To audit Data Feed Recipients' Non-Display use of market data
in accordance with the terms of their market data agreements with
vendors and others; and
(b) charge Non-Display fees to Data Feed Recipients that do not
report any display activity, and do not return a completed declaration
in accordance with the requirements specified above.

B. Impact of the Proposed Fee Changes

As with any rebalancing of fees, these 2015 Fee Changes may result
in some Data Feed Recipients paying higher total market data fees and
in others paying lower total market data fees. The Participants
anticipate that the 2015 Fee Changes will not generate enough revenue
to offset past and future attrition in reported consolidated market
data activity data. That attrition (``Attrition'') takes two primary
forms.
First, the reduction in Professional Subscriber device fees will
reduce revenues under the Plan. They estimate that the percentage of
total Plan revenues derived from Professional Subscriber device fees
will fall as a result of the reduction in the fee from 59 percent to 54
percent.
Second, several customer-usage trends have declined year-over-year
since 2008, particularly declines in Professional Subscriber's
consumption of consolidated market data. (More information on these
declines can be found in the Participants' Consolidated Data Quarterly
Operating Metrics Reports. Those reports can be found at https://www.utpplan.com). The decline in Professional Subscriber data usage has
resulted from a challenging financial environment, and corporate
downsizing, as well as a liberalization of the SEC's Vendor Display
Rule that has permitted substitution of lower-cost and

[[Page 60527]]

lower-value proprietary data product offerings.
As a result of these declines, revenues generated under the Plans
have declined significantly. Since 2008, CTA/UTP market data revenue
has declined 16 percent from approximately $463 million in 2008 to $388
million annualized through March of 2014. The Participants will review
the impact of the 2015 Fee Changes on an on-going basis and reserve the
right to further amend fees in the future, subject to filing any such
amended fees with the Commission in accordance with Regulation NMS.
Because the Non-Display fee would be new, it is difficult to
estimate the impact they would have on revenues. A best guess is that
they would account for approximately 5 percent of revenues. If current
usage levels remain the same, the increase in the per-query fee would
raise revenues by approximately 1 percent. The decline in the
Professional fee would decrease revenues by 5 percent, assuming there
was no additional attrition.
Most firms would be impacted only slightly by the 2015 Fee Changes,
though a small number of firms would see a more significant impact.
Some of the largest firms would realize sizable savings or a large
increase in costs.
The Participants estimate that the changes would increase Plan
revenues by approximately two to three percent over the prior year,
though that number is hard to estimate, given the uncertainties of Non-
Display use revenues and declining Level 1 Professional populations.
The Participants note that the 2015 Fee Changes would contribute to
stemming the significant loss of revenues under the Plans in recent
years as a result of large multi-year declines in Display Devices that
Professional Subscribers use. Furthermore, the rise in off-exchange
trading has meant that a smaller portion of those revenues have been
allocated to exchanges. Thus, the Participants believe that the 2015
Fee Changes would not result in a material increase in overall revenues
under the Plans, but would help to stem the tide of declining revenues
caused by trends in the use of Display Devices by Professional
Subscribers.

C. Governing or Constituent Documents

Not applicable.

D. Implementation of the Amendments

Rule 608(b)(3)(i) of Regulation NMS (the ``Rule'') permits the
Participants to designate a proposed plan amendment as establishing or
changing fees and other charges, and to place such an amendment into
effect upon filing with the Commission. As mentioned above, the
Participants have made that designation. The Rule does not place any
limitations on which particular fee changes qualify for immediate
effectiveness. Rather, if the Commission believes that a longer comment
period is appropriate for a particular filing, it may extend the
comment period or abrogate the filing. Ample precedents exist for the
filing of multiple or even complex fee changes to NMS Plans on an
immediately effective basis over the past thirty years.\10\
---------------------------------------------------------------------------

\10\ See, e.g., Fifth Charges Amendment to the First Restatement
of the CTA Plan, File No. S7-433, Release No. 34-19342, 47 FR 57369
(December 23, 1982); Fourteenth Charges Amendment to the First
Restatement of the CTA Plan and Fifth Charges Amendment to the
original CQ Plan, File No. S7-30-91, Release No. 34-29863, 56 FR
56429 (November 4, 1991); Second Charges Amendment to the CTA Plan
and First Charges Amendment to the CQ Plan, SR-CTA/CQ-97-2, Release
No. 34-39235, 62 FR 54886 (October 14, 1997); OPRA Plan amendment
SR-OPRA-2004-01, Release No. 34-49382, 69 FR 12377 (March 16, 2004);
OPRA Plan amendment SR-OPRA-2007-04, Release No. 34-56950, 72 FR
71722 (December 18, 2007); OPRA Plan amendment SR-OPRA-2012-02,
Release No. 34-66564, 77 FR 15833 (March 16, 2012).
---------------------------------------------------------------------------

Pursuant to the Rule, the Participants have designated Amendment 33
as establishing or changing fees, and will have notified the industry
of the proposed Fee Changes well in advance of Amendment 33's effective
date. The Participants anticipate implementing the proposed 2015 Fee
Changes on January 1, 2015, and intend to give further notice to Data
Feed Recipients and end-users of the 2015 Fee Changes.

E. Development and Implementation Phases

See Item I(C) above.

F. Analysis of Impact on Competition

The proposed amendments do not impose any burden on competition
that is not necessary or appropriate in furtherance of the purposes of
the Exchange Act. The proposed fee changes reflect the Participants'
views that it is appropriate to rebalance the allocation of market data
fees and to better track the changing trends in the ways in which the
industry uses market data. The proposed fee changes comport with the
proliferation of the use of data for dark pools and other Non-Display
trading applications. They recognize industry changes that have evolved
as a result of numerous technological advances, the advent of trading
algorithms and automated trading, different investment patterns, a
plethora of new securities products, unprecedented levels of trading,
and developments in portfolio analysis and securities research.
In addition, the 2015 Fee Changes would simplify firms'
administrative burdens by harmonizing the Plans' fee structures with
those under the CTA Plan, the CQ Plan and the OPRA Plan. The use of an
annual declaration for Non-Display Use reporting purposes would
alleviate the burden of counting devices used for non-trading purposes.
The Participants note that the list of exchanges that have
previously implemented Non-Display fees includes the London Stock
Exchange, Nasdaq BX, Nasdaq PSX, Nasdaq, NYSE, NYSE MKT LLC and NYSE
Arca. They note that the OPRA Plan imposes Non-Display fees and that
they understand that the Participants in the CTA Plan and the CQ Plan
anticipate doing so shortly.
The Participants hope that the reductions in the Professional
Subscriber Display Device rate will foster the widespread availability
of real-time market data. At the same time, the new fees for Non-
Display uses of market data would cause firms making Non-Display use of
data to make appropriate contributions to the costs of collecting,
processing and redistributing the data.
In addition, the proposed fee changes would cause the Plan's fees
to sync more closely with fee structures under the CTA Plan, the CQ
Plan and the OPRA Plan. The proposed reductions in the Professional
Subscriber device fee would allow that fee to compare even more
favorably with the Professional Subscriber device fees payable under
those other Plans and with the Professional Subscriber device fees
charged for market data by the largest stock exchanges around the
world. The proposed Non-Display fees compare favorably with the
comparable fees that the Participants understand the Participants in
the CTA Plan and the CQ Plan intend to establish and with the Non-
Display fees that individual exchanges charge for their proprietary
products. The proposed increase in the per-query fees would harmonize
those fees with the per-query fees paid under the OPRA Plan and the
comparable fee that the Participants understand the Participants in the
CTA Plan and the CQ Plan intend to set.
As a result, the 2015 Fee Amendments would promote consistency in
fee structures among the national market system plans, as well as
consistency with the preponderance of other market data providers. This
would make market data fees easier to administer for Data Feed
Recipients.

[[Page 60528]]

In the Participants' view, the proposed fee schedule would result
in each category of Data Feed Recipient and data user contributing an
appropriate amount for their receipt and use of market data under the
Plan. The proposed fee schedule would provide for an equitable
allocation of dues, fees, and other charges among broker-dealers,
vendors, end-users and others receiving and using market data made
available under the Plan by recalibrating the fees to more closely
correspond to the different benefits different categories of users
derive from their different uses of the market data made available
under the Plan.
The Participants propose to apply the revised fee schedule
uniformly to all constituents (including members of the Participant
markets and non-members). The Participants do not believe that the
proposed fee changes introduce terms that are unreasonably
discriminatory.
The Participants note that fees under the CTA and CQ Plan compare
very favorably with the fees that individual exchanges charge for their
proprietary data products.

G. Written Understanding or Agreements Relating to Interpretation of,
or Participation in, Plan

Not applicable.

H. Approval by Sponsors in Accordance With Plan

In accordance with Section IV(C)(2) of the Plan, more than two-
thirds of the Participants have approved the 2015 Fee Change.

I. Description of Operation of Facility Contemplated by the Proposed
Amendments

Not applicable.

J. Terms and Conditions of Access

See Item I(A) above.

K. Method of Determination and Imposition, and Amount of, Fees and
Charges

1. In General
The Participants took a number of factors into account in deciding
to propose the 2015 Fee Changes. To begin, the Participants' market
data staff communicates on an on-going basis with all sectors of the
Participants' constituencies and assesses and analyzes the different
broker/dealer and investor business models. The staff has expertise in
the information needs of the Participants' constituents and used their
experience and judgment to form recommendations regarding the 2015 Fee
Changes, vetted those recommendations with constituents and revised
those recommendations based on the vetting process.
Most significantly, the Participants went back and carefully
listened to the recommendations of their Advisory Committee. The Plan
requires the Advisory Committee to include, at a minimum, a broker-
dealer with a substantial retail investor customer base, a broker-
dealer with a substantial institutional investor customer base, an
alternative trading system, a data vendor, and an investor. Advisory
Committee members attend and participate in meetings of the
Participants and receive meeting materials. Members of the Advisory
Committee gave valuable input that the Participants used in crafting
the proposed 2015 Fee Changes. At several meetings of the Plan's
Operating Committee, Advisory Committee members gave valuable input
into the formulation of the 2014 Fee Amendments.
In reassessing and rebalancing market data fees as proposed in the
amendments, the Participants took a number of factors into account in
addition to the views of its constituents, including:
(a) Examining the impact that they expect attrition to have on
revenues;
(b) crafting fee changes that will not have a significant impact on
total revenues generated under the Plans;
(c) setting fees that compare favorably with fees that the biggest
exchanges around the globe and the CT/CQ Plan and the OPRA Plan charge
for similar services;
(d) setting fees that require each category of market Data Feed
Recipient and end-user to contribute market data revenues that the
Participants believe are appropriate for that category;
(e) crafting fee changes that appropriately differentiate between
constituents in today's environment (e.g., Non-Display firms vs.
registered representative firms; large firms vs. small firms;
redistributors vs. end-users); and
(f) crafting fees that reduce administrative burdens of Data Feed
Recipients and, in the case of the new Non-Display Use fees, minimizes
administrative requirements.
2. An Overview of the Fairness and Reasonableness of Market Data Fees
and Revenues Under the Plans
a. The Fee Changes Will Have No Impact on Most Individual Investors
The vast majority of Nonprofessional Subscribers (i.e., individual
investors) receive market data from their brokers and vendors. The
Participants impose Nonprofessional Subscriber fees on the brokers and
vendors (rather than the investors) and set those fees so low that most
brokers and vendors tend to absorb the fees, meaning that the vast
majority of individual investors do not pay for market data. The
Participants anticipate that the changes to the per-query fee would not
have a significant impact on the willingness of broker-dealers to
continue to pay the fee on behalf of their customers. The 2015 Fee
Changes, including the proposed increase in the per-query fee, will
thus have almost no impact on Nonprofessional investors.
b. The Fee Changes Respond to Customer Wishes
The Fee Changes are fair and reasonable because they offer a
resolution to the call by industry participants for a simplified,
updated fee schedule that harmonizes with fee schedules under other
national market system plans and reduces administrative burdens, a
resolution that industry representatives on the Plans' Advisory
Committee have warmly embraced.
c. Long-Term Trend of Rate Reduction
The existing constraints on fees for core market data under the
Plan have generally succeeded in reducing market data rates over time.
For example, when the effects of inflation are taken into account, the
average monthly rate payable for Professional Subscriber device has
consistently and dramatically fallen in real terms over the past 16
years. When inflation is taken into account, the real monthly cost of a
Professional Subscriber device was $20 in 1997; $17.84 in 2002; $15.48
in 2007 and $13.98 in 2012. Put differently, had price increases kept
pace with inflation, the cost of Professional usage of Level 1 data
would have increased from $20 in 1997 to $21.94 in 2001; $23.94 in
2005; $27.86 in 2009; and $29.80 in 2014.\11\
---------------------------------------------------------------------------

\11\ Based on COLA changes, as found at www.ssa.gov.
---------------------------------------------------------------------------

d. Explosion of Data
Although the device fees have fallen after taking inflation into
account, the amount of data message traffic that end-users receive by
subscribing has skyrocketed, as has the speed at which the data is
transmitted.
i. New Data Added to Consolidated Feeds
The Participants have continually enhanced the consolidated feeds.
The enhancements provide significant value. They are critical to the
industry in that

[[Page 60529]]

they permit end-users to do such things as view new markets and
implement new regulation. Below is a list of the more significant
recent enhancements, including the addition of new Participants, new
indicators, new sale conditions, new reason codes and dedicated test
symbols.

------------------------------------------------------------------------
Milestones
------------------------------------------------------------------------
2014
------------------------------------------------------------------------
January......................................... Implemented January
2014 bid rate
changes:
Quotes:
379,500mps
Trades:
77,960mps
Cleaned SAN fiber
cable ends to resolve
intermittent
connectivity issue.
Reset network
interface on
monitoring server to
resolve connectivity
issue.
Implemented socket
handler fixes and ACE
library upgrade in
primary OMDF.
Backend in primary
production
environment.
Implemented
miscellaneous bug
fixes for several
internal components.
February........................................ Implemented socket
handler fixes and ACE
library upgrade in
secondary OMDF.
Backend in primary
production
environment and
disaster recovery
environment.
Implement bandwidth
increase for OMDF to
12,000mps.
Implemented daily .csv
file with 100ms peak
traffic rate data.
Increased OMDF
database transaction
log backup frequency
from 2 hours to 5
minutes.
Replaced faulty LUN
for SRA 2011
historical data.
Implemented load
balancer upgrade
(primary production
site).
Implemented peak
traffic statistics
spreadsheet
automation.
March........................................... Implemented FEP
upgrade (primary
production site).
April........................................... Implemented Reference
Price Calculator fix
for price band
clearing.
Implemented trade FEP
fix for regional
reference number
return.
Implemented penalty
report generation fix
for arithmetic
overflow.
Implemented quote FEP
fix for regional
reference number
return.
Implemented fix for
internal
acknowledgement issue
from April 3.
Implemented back end
server tuning
changes.
May............................................. Removed CBSX bid rates
in UQ/UT resulting
from their
deactivation request.
Implemented database
server tuning
changes.
Extended Limit Up/
Limit Down price band
publication to market
close.
Upgraded firmware on
server in D/R
environment to
resolve reboot
issues.
June............................................ Implemented disaster
recovery build-out,
including F5 load
balancer and
automatic quote
wipeout on D/R
failover.
Upgraded firmware on
server in primary
production
environment to
resolve reboot
issues.
Upgraded BLU and Back
End components in
primary production
environment with D/R
build-out software
versions.
Upgraded FEP
components in primary
production
environment with D/R
build-out software
versions.
Implemented UQDF and
UTDF bandwidth
upgrade
Implemented
Republisher server
tuning changes.
July............................................ Implemented July 2014
bid rate changes:
Quotes:
483,400mps
Trades:
117,000mps
Implemented penalty
software using 100ms
measurement interval.
Implemented new
Supervisory Console
page.
Implemented
retransmission
handling fix for all
primary UQDF and UTDF
dissemination
components.
------------------------------------------------------------------------
2013
------------------------------------------------------------------------
January......................................... Implemented January
2013 bid rate
changes:
Quotes:
227,701mps
Trades:
38,300mps
Reconfigured UQDF,
UTDF, and OMDF
servers to restore
network switch
diversity for primary
and backup services.
Implemented Limit Up/
Limit Down Software
(no stocks eligible).
Implemented secure FTP
server for SRA.
Implemented UTP Data
Feed bandwidth
increase:
UQDF 256Mb--
400,000 MPS
UTDF 101 Mb--
150,000 MPS
OMDF 2 MB--
2,800 MPS
February........................................ Implemented reference
price calculator/
price band
dissemination.
Enabled test stocks
for limit up/limit
down.
March........................................... Implemented reference
price calculator
changes.
Implemented software
fix for rejected `A4'
quote inputs.
Submitted as-of trade
reports for January
3rd issue.
Implemented new front
end software version
(fixes &
enhancements).
Implemented enhanced
reference price
calculator module.
Implemented patch for
memory growth issue
on one server.
Implemented patch for
memory growth issue
on three servers.
Implemented new front
end software version
(memory growth
issue).
Implemented fix for
LULD indicator value
during trading pause.
Changed UTP feed start
of day time from
4:00am to 3:58am.

[[Page 60530]]

April........................................... Implemented Market
Wide Circuit Breaker
interface.
Retired legacy
Emergency Market
Conditions Halt/
Resume functions.
Enabled limit up/limit
down for 10 NASDAQ-
listed tier 1
securities.
Submitted additional
as-of trade reports
for January 3rd
issue.
Enabled limit up/limit
down for 19 NASDAQ-
listed tier 1
securities.
Implemented
information security
recommendations for
internal browser-
based applications
(monitoring and
console).
Enabled limit up/limit
down for 65 NASDAQ-
listed tier 1
securities.
Enabled limit up/limit
down for 77 NASDAQ-
listed tier 1
securities.
May............................................. Enabled limit up/limit
down for 97 NASDAQ-
listed tier 1
securities.
Implemented reference
price calculator
disaster recovery
handling.
Changed time source
for servers running
reference price
calculators.
Resized ISG column to
handle full UQDF
session close recap
message.
Disabled ``Auto-run''
feature on all SIP
servers.
June............................................ Disabled hyper-
threading on servers
running reference
price calculators.
Implemented software
fix for incorrect
high price
calculation resulting
from trade
correction.
Manually failed over
primary UQDF5
dissemination
component to its
backup after market
close (to service
pending
retransmission
requests).
Updated multicast port
restriction range on
all SIP servers.
Implemented LULD limit
state release.
July............................................ Implemented July 2013
bid rate changes:
Quotes:
194,102mps
Trades:
36,102mps
Completed a
participant
connectivity request.
Implemented throttling
statistics collection
changes.
August.......................................... Enabled limit up/limit
down for 50 NASDAQ-
listed tier 2
securities.
Extended the price
band calculation and
dissemination period
(9:30am-3:45pm);
double-wide bands
calculated from
9:30am-9:45am and
3:35pm-3:45pm.
September....................................... Rolled out UTDF
connectivity fix.
Enabled limit up/limit
down for 10% of
NASDAQ-listed tier 2
securities.
Enabled limit up/limit
down for an
additional 30% of
NASDAQ-listed
securities.
Enabled limit up/limit
down for all eligible
NASDAQ-listed
securities.
Implemented FEP
emergency fix on
quote server `A' in
primary site.
Implemented FEP
emergency fix on
quote server `C' and
trade server `A' in
primary site.
Replaced DIMM and
motherboard for
primary UQDF channel
5 server.
October......................................... Implemented FEP
emergency fix on
quote server `E' and
trade server `C' in
primary site.
November........................................ Implemented FEP
emergency fix on all
remaining quote and
trade servers in
primary site.
Implemented FEP
emergency fix on all
servers in disaster
recovery environment.
December........................................ Implemented capacity
staging release.
Implemented
retransmission fix on
UQDF channel 6 in
primary site.
Implemented
retransmission fix on
UQDF channels 4 and 5
in primary site.
Implemented
retransmission fix on
UQDF channels through
3 in primary site.
Implemented
retransmission fix on
all UQDF channels in
disaster recovery
environment.
Replaced end-of-life
switch chassis (`A'
side).
Replaced failed power
supply for UTDF 5
primary server.
Implemented a browser
incompatibility fix
for the SIP
monitoring
application.
Implemented socket
handler fixes and ACE
library upgrade in
all primary quote and
trade BLUs in the
primary production
environment.
Upgraded power supply
and added a module to
`B' side switch.
Implemented socket
handler fixes and ACE
library upgrade in
all secondary quote
BLUs in the primary
production
environment.
Implemented socket
handler fixes and ACE
library upgrade in
all secondary trade
BLUs in the primary
production
environment.
Implemented socket
handler fixes and ACE
library upgrade in
all quote and trade
BLUs in the disaster
recovery environment.
Implemented trade
reporting
enhancements (odd
lots).
------------------------------------------------------------------------
2012
------------------------------------------------------------------------
February........................................ Implemented UQDF
bandwidth increase to
175 Mbps.
Implemented a
connectivity request
for BATS and BATS-Y.
April........................................... Implemented UTDF
Capacity Phase III
changes on UTDF
channel 1.
Implemented a
connectivity request
for NASDAQ.
May............................................. Implemented UTDF
Capacity Phase III
changes on UTDF
channels 2-6.
October......................................... Implemented
significant UQDF,
UTDF, and OMDF
message format
changes in
preparation for the
Limit Up/Limit Down
and Market-Wide
Circuit Breaker
initiatives.
Implemented support
for participants'
Retail Liquidity
programs.
------------------------------------------------------------------------
2011
------------------------------------------------------------------------
January......................................... UQDF bandwidth
increased to 96 Mbps,
approximately 175,000
messages per second
(MPS).
UTDF bandwidth
increased to 33.5
Mbps, approximately
60,000 mps.
May............................................. Installed quote
processing
improvements for UQDF
channel 1.
June............................................ Installed quote
processing
improvements for UQDF
channel 2-6.

[[Page 60531]]

October......................................... Implemented UQDF
Capacity Phase III
changes (throughput
and latency
improvements).
Implemented a network-
based end-to-end
latency measurement
solution.
November........................................ Implemented UQDF and
UTDF symbol
redistribution.
------------------------------------------------------------------------
2010
------------------------------------------------------------------------
January......................................... Updated quote and
trade capacity
thresholds based on
capacity study.
February........................................ Modified As Of trade
processing for
instruments trading
in a round lot of
less than 100 (e.g.
preferred stock,
convertible notes).
March........................................... Implemented dynamic
throttling
communication
improvements.
Implemented quote
Front End
enhancements to
reduce CPU usage and
increased throughput.
Retired unused
participant input
lines.
April........................................... Facilitated a request
from NASDAQ OMX PHLX
for input
connectivity.
Facilitated a request
from Bats-Y for input
connectivity.
May............................................. Implemented UTDF
improvements to
increase throughput
and reduce latency.
June............................................ Implemented single-
stock circuit breaker
halt reason codes.
Activated participants
EDGA Exchange, Inc.
and EDGX Exchange,
Inc.
July............................................ Updated quote and
trade capacity
thresholds based on
capacity study.
August.......................................... Implemented short sale
trading restriction
messaging.
Enhanced market center-
specific non-
regulatory halts to
support liquidity
imbalances.
Increased UTDF
bandwidth to 12.5
Mbps in order to
accommodate
approximately 22,500
peak messages per
second.
Implemented daily peak
traffic rate CSV
files on SRA FTP
site.
September....................................... Implemented daily peak
traffic rate
spreadsheet on SRA
FTP site.
Upgraded quote input
servers in the
primary production
environment.
October......................................... Activated BATS-Y
Exchange.
Upgraded trade input
servers in the
primary production
environment.
Upgraded participant
input servers in the
disaster recovery
environment.
November........................................ Implemented
performance
improvements in
preparation for
bandwidth increases
in January 2011.
December........................................ Implemented
``Consolidator''
model performance
improvements for
UTDF.
------------------------------------------------------------------------
2009
------------------------------------------------------------------------
January......................................... Expanded bandwidth for
UQDF to handle 53,600
messages per second
and UTDF to handle
8400 mps.
Modified quarterly
statistics report to
include date and time
of 5 minute peak
messaging.
February........................................ Implemented aberrant/
erroneous trade tool
to allow the SIP
operator to cancel or
error large
quantities of trades
at a participant's
request.
March........................................... Enabled dynamic
throttling for
quotes.
Started beta phase for
penalty reports.
May............................................. Implemented a latency
reduction enhancement
for quotes and
trades.
June............................................ Implemented SRA and
ISG changes in
preparation for
expansion of UQDF and
UTDF multicast
channels.
August.......................................... Expanded UQDF and UTDF
from three to six
multicast channels.
Increased UQDF
bandwidth to 56 Mbps
in order to
accommodate
approximately 100,000
peak messages per
second.
Increased UTDF
bandwidth to 8 Mbps
in order to
accommodate
approximately 15,000
peak messages per
second.
September....................................... Implemented three new
participants (EDGA,
EDGX, and BYX) with
test quote and trade
ports.
Implemented metrics-
collection software
to improve
performance
monitoring.
October......................................... Implemented Front End
performance
enhancements to
reduce CPU usage.
November........................................ Facilitated requests
from EDGA and EDGX
for input
connectivity.
December........................................ Implemented further
performance
enhancements to
reduce CPU usage.
Completed setup of a
NASDAQ-hosted website
for the UTP Plan
Administrator: https://www.utpplan.com/.
------------------------------------------------------------------------
2008
------------------------------------------------------------------------
January......................................... Support for new stock
option ``V'' Trade
modifier.
February........................................ Expanded UQDF
bandwidth from 7.8 to
12.5 megabits per
second (mbps) to
support approximately
23,300 messages per
second (mps).
March........................................... Increased the field
size for participant
inbound sequence
number from 7 to 8
digits to support
increasing messaging
rates.
April........................................... Facilitated a request
from BSX for input
connectivity.
June............................................ Implemented change to
support a new
Emergency Market
Condition quote
resume message.
July............................................ Expanded UQDF
bandwidth from 12.5
to 28.0 mbps to
support approximately
48,000 mps. UTDF
bandwidth was
expanded from 3.0 to
4.0 mbps to support
approximately 7,200
mps.
September....................................... Facilitated a request
from BATS Exchange
Inc. for input
connectivity.
October......................................... Activation of the BATS
Exchange as a new
participant in UQDF
and UTDF.
November........................................ Implemented a
participant quote
throttling mechanism
to protect the system
against instability
and high latency
during periods of
heavy traffic, while
guaranteeing each
participant full
access to its
projected peak rate.
December........................................ Upgraded SQL database
servers to SQL Server
2008 to enhance
database performance.
------------------------------------------------------------------------
2007
------------------------------------------------------------------------
January......................................... Support one, two, and
three character stock
symbols for NASDAQ
listed issuers, in
addition to the
currently used four-
and five-character
symbols.

[[Page 60532]]

February........................................ Regulation NMS
compliance for quotes
and trades--
Quotes: Replace
existing NASD quote
message with new
message that adds a
new 1 byte FINRA
appendage indicator.
Supports a new
appendage that
identifies FINRA best
bid Market
Participant ID (MPID)
and FINRA best offer
MPID.
Trades: Support new
trade through exempt
flag and new 4 byte
sale condition field.
This resulted in new
message formats for
long form trade
reports, trade
cancellations, and
trade corrections.
Introduce new Prior
Day As-Of Trade
message to allow
reporting a trade
that occurred prior
to the current
business day or to
cancel an erroneously
reported trade from a
previous day.
April........................................... Facilitated a request
from NSX for input
connectivity.
June............................................ Facilitated a request
from NSX for input
connectivity.
July............................................ Implemented changes to
allow Cash Settlement
(C), Next Day (N),
and Seller Sale Days
Settlement (R) sale
conditions for trade
reports that are not
exempt from the trade-
through rule.
August.......................................... Facilitated a request
from ISE for input
connectivity.
September....................................... Support for new Price
Variation (H) and
Cross (X) trade
modifiers.
Dissemination of the
bid tick indicator is
now inhibited.
December........................................ Enhancement to Quote
Wipeout processing to
improve processing
times.
------------------------------------------------------------------------

ii. Significant Improvements in Latency and Capacity
The Participants have made numerous investments to improve system
speed and capacity, investments that are often overlooked by the
industry. The Participants regularly monitor and review the performance
of their SIP and make performance statistics available publicly on a
quarterly basis. They make investments to upgrade technology, upgrades
that enable the SIP to collect and disseminate the data ever more
quickly, even as the number of quotes and trades continues to rise. The
Participants will make future investments to handle the expected
continued rise in message traffic, and at even faster data
dissemination speeds.
The information below shows that customers are getting the quote
and trade Data Feeds faster, as the latency of consolidated tape quote
and trade feeds has improved significantly in recent years. Average
quote feed latency declined from over 5 milliseconds at the end of 2009
to 0.520 milliseconds in July 2014 and average trade feed latency
declined from over 6 milliseconds at the end of 2009 to 0.565
milliseconds in July 2014, as shown below. Latency is measured from the
time a message received from a Participant is time-stamped by the
system, to the time that processing the message is completed.

----------------------------------------------------------------------------------------------------------------
Average quote latency Average trade latency
Month (milliseconds) (milliseconds)
----------------------------------------------------------------------------------------------------------------
Dec 2009...................................................... 5.2497 6.2685
Dec 2010...................................................... 4.3267 5.6796
Dec 2011...................................................... 2.5378 7.8491
Dec 2012...................................................... 1.6837 1.6328
Dec 2013...................................................... 1.1700 1.2490
Jan 2014...................................................... 1.129 1.237
Feb 2014...................................................... 1.282 1.255
Mar 2014...................................................... 1.160 1.313
Apr 2014...................................................... 0.894 1.093
May 2014...................................................... 0.564 0.641
Jun 2014...................................................... 0.589 0.717
Jul 2014...................................................... 0.520 0.565
----------------------------------------------------------------------------------------------------------------

iii. Significant Improvements in System Throughput, Measured by
Messages Per Second
Investments in hardware and software have increased processing
power and enabled the systems to handle increasing throughput levels.
This is measured by peak capacity messages per second and is monitored
by looking at actual peak messages per second. SIP throughput continues
to increase in order to push out the increasing amounts of real-time
quote and trade data.
Given the constant rise in peak messages, the SIP significantly
increased system capacity. As shown below, the system could handle peak
quotes per second of approximately 175,000 in 2010 and 707,000 in 2014,
an increase of more than 304 percent. The capacity for trades per
second increased from 36,000 in 2010 to 393,000 in 2014, an increase of
more than 990 percent. To better manage the rise in message traffic,
the Participants anticipate that capacity planning will move from
measuring messages per second to measuring messages per millisecond.
BILLING CODE 8011-01-P

[[Page 60533]]

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[GRAPHIC] [TIFF OMITTED] TN07OC14.025

[[Page 60534]]

BILLING CODE 8011-01-C
e. Vendor Fees
Fees imposed by data vendors, whom the Commission does not
regulate, account for a vast majority of the global market data fees
incurred by the financial industry, according to Burton Taylor
Associates, cited in a research study by Atradia.\12\ In addition to
charging monthly subscription fees for end-users, market data vendors
may apply significant administration mark-up fees on top of exchange
market data fees. These mark-ups are not regulated and there is limited
transparency into how the rates are applied. These mark-ups do not
result in any additional revenues for the Participants; the vendors
alone profit from them.
---------------------------------------------------------------------------

\12\ Atradia, The Cost of Access to Real Time Pre and Post Trade
Order Book Data in Europe, August 2010 (available at www.siia.net).
---------------------------------------------------------------------------

f. Declining Unit Purchase Costs for Customers
Despite consolidated tape investments in new data fields,
additional capacity demands and latency improvements, users' unit
purchase costs for trade and quote data have declined significantly,
increasing the value of the data they receive from their subscriptions.
The amount of quote and trade data messages has increased significantly
while fees have remained unchanged, as shown below for the 2000 to 2013
timeframe.
The average purchase cost of Plan quotes has steadily declined
since 2000. During that period, the average number of quotes per day
increased over 2,500 percent between 2000 and mid-2014, rising from 4.3
million in 2000 to 112 million in 2014. As a result, the average unit
purchase cost per one million quote messages for a customer incurring a
monthly Professional Subscriber fee of $20 in 2000 or $23 in 2014
declined over 95 percent during this period, falling from $4.61 in 2000
to $0.20 in 2014.
[GRAPHIC] [TIFF OMITTED] TN07OC14.026

The average cost of last sale transaction reports also declined
over that period. For instance, in 1998, the Plan Processor received
reports for 155 million trades. By 2014, those numbers had increased to
over 11 million per day or over 2.2 billion trades. At the same time,
Professional Subscriber fees remained fairly constant and the
introduction of a Nonprofessional Subscriber fee and an enterprise
maximum reduced fees dramatically for whole categories of users and
expanded data distribution to thousands of other users.
Of course, these calculations exclude entirely the high indirect
costs of producing consolidated data represented by the costs of each
exchange collecting and contributing data to create the consolidated
feeds. With respect to indirect costs, the Commission has previously
noted that ``any attempt to calculate the precise cost of market
information presents severe practical difficulties.'' \13\ In
commenting on the 1999 Concept Release, NYSE summarized many of the
``severe practical difficulties'' attendant to each Participant's
calculation of its data production and collection costs and we
incorporate that discussion here.\14\ In 1997, the indirect costs of
the Participants would have included the data production and collection
costs of eight national securities exchanges and one national
securities association. In 2014, that calculation would have to include
the data production and collection costs of the 15 Participants,
including 14 national securities exchanges and the Alternative Display
Facility and two Trade Reporting Facilities that FINRA, the lone
national securities association, maintains.
---------------------------------------------------------------------------

\13\ See SEC 1999 Concept Release on ``Regulation of Market
Information Fees and Revenues'' (the ``1999 Concept Release'')
located at https://www.sec.gov/rules/concept/34-42208.htm.
\14\ See footnote 11 of letter from James E. Buck, Senior Vice
President and Secretary, NYSE, April 10, 2000, located at https://www.sec.gov/rules/concept/s72899/buck1.htm.>
---------------------------------------------------------------------------

In addition to those indirect costs, the costs of administering
market data

[[Page 60535]]

distribution under the Plan have increased dramatically, as the
administrator has rolled out new and enhanced tracking, data
management, and invoice management systems to accommodate vendors and
the industry and has enhanced its compliance-review capabilities.
3. Adequate Constraints on Fees
Constituent boards, customer control and regulatory mechanisms
constrain fees for core market data now just as they have since
Congress established the fair-and-reasonable standard in 1975. Under
the Plan, NASDAQ, the listing market, typically takes the lead on
pricing and administrative proposals, vetting new proposals with the
other Participants, various Data Feed and end-users, and trade and
industry groups, and making modifications which improve or reevaluate
the original concept. Proposals are then taken to each Participant for
approval. However, significant market data user and regulatory
requirements constrain the Participant's ability to simply impose fee
changes, as demonstrated by the failed attempts earlier this year.
The governing body of each Participant consists of representatives
of constituent firms and a large quotient of independent directors. The
Participants' constituent board members have the ultimate say on
whether the UTP Plan Operating Committee should submit fee proposals to
the Commission and whether the costs of operating the markets and the
costs of the market data function are fairly allocated among market
data users. That is, the users of market data and non-industry
representatives who sit on Participant boards get to determine whether
to support market data fee proposals. They also get to determine how
the various types of data users should pay their fair share and they
make decisions about funding technical infrastructure investments
needed to receive, process and safe-store the orders, quotations and
trade reports that give rise to the data. This cost allocation by
consensus is buttressed by Commission review and is superior to cost-
based rate-making.
Indeed, in recent decades, Congress and federal agencies, including
the Commission, have increasingly moved away from intrusive, cost-based
ratemaking in favor of more market-oriented approaches to pricing. For
example, it was the intent of Congress in creating the national market
system to rely on competitive forces, where possible, to set the price
of market information.\15\ Consistent with this intent, an Advisory
Committee appointed by the Commission in 2001 to review market data
issues concluded that ``the `public utility' cost-based ratemaking
approach is resource-intensive, involves arbitrary judgments on
appropriate costs, and creates distortive economic incentives.'' \16\
In response, and consistent with the purposes of the Exchange Act, the
Commission has increasingly permitted competitive forces to determine
the prices of market data fees.\17\ This conclusion mirrors the
experience of other federal agencies that have come to reject cost-of-
service ratemaking as a cumbersome and impractical process that
stifled, rather than fostered, competition and innovation.\18\
---------------------------------------------------------------------------

\15\ See Conference Report, H.R. Rep. No. 94-229, 94th Cong.,
1st Sess. 92 (1975), at 92 (``It is the intent of the conferees that
the national market system evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed.'').
\16\ Report of the Advisory Committee on Market Information: A
Blueprint for Responsible Change, at Sec. VII.D.3 (SEC Sept. 14,
2001); see also Stephen G. Breyer, Analyzing Regulatory Failure:
Mismatches, Less Restrictive Alternatives, and Reforms, 92 Harv. L.
Rev. 547, 565 (1979) (``[I]nsofar as one advocates price regulation
. . . as a `cure' for market failure, one must believe the market is
working very badly before advocating regulation as a cure. Given the
inability of regulation to reproduce the competitive market's price
signals, only severe market failure would make the regulatory game
worth the candle.'').
\17\ See generally NetCoalition v. SEC, 615 F.3d 525, 533-35
(D.C. Cir. 2010).
\18\ See, e.g., Elizabethtown Gas Co. v. FERC, 10 F.3d 866, 870
(D.C. Cir. 1993).
---------------------------------------------------------------------------

Market forces are plainly adequate to constrain the prices for
market data proposed herein by the Plan and its Participants.
Constituent Board members are the Participants' market data customers.
When a critical mass of them voices a point of view, they can direct
the Participants how to act. This is part of what motivated the
Participants to propose the 2015 Fee Changes. The Commission's process,
including public comment as appropriate and when permitted by the
statutory language, then acts as an additional constraint on pricing.
Also, developments in technology make possible another important
constraint on market data prices for core data: There is nothing to
prevent one or more vendors, broker-dealers or other entities from
gathering prices and quotes across all Participants and creating a
consolidated data stream that would compete with the Plans' data
streams. The technology to consolidate multiple, disparate data streams
is readily available, and multiple markets have already introduced
products that compete with core data.

K. Method and Frequency of Processor Evaluation

No Change.

L. Dispute Resolution

No Change.

II. Rule 601(a)

A. Equity Securities for Which Transaction Reports Shall Be Required by
the Plan

No Change.

B. Reporting Requirements

No Change.

C. Manner of Collecting, Processing, Sequencing, Making Available and
Disseminating Last Sale Information

No Change.

D. Manner of Consolidation

No Change.

E. Standards and Methods Ensuring Promptness, Accuracy and Completeness
of Transaction Reports

No Change.

F. Rules and Procedures Addressed to Fraudulent or Manipulative
Dissemination

No Change.

G. Terms of Access to Transaction Reports

See Item I(A).

H. Identification of Marketplace of Execution

No Change.

III. Solicitation of Comments

The Commission seeks general comments on Amendment No. 32.
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposal 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 S7-24-89 on the subject line.

Paper Comments

Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.

All submissions should refer to File Number S7-24-89. This file number
should be included on the subject line if email is used. To help the

[[Page 60536]]

Commission process and review your comments more efficiently, please
use only one method. The Commission will post all comments on the
Commission's Web site (https://www.sec.gov/rules/sro.shtml). Copies of
the submission, all written statements with respect to the proposed
Plan Amendment that are filed with the Commission, and all written
communications relating to the proposed Plan Amendment between the
Commission and any person, other than those that may be withheld from
the public in accordance with the provisions of 5 U.S.C. 552, will be
available for Web site viewing and printing in the Commission's Public
Reference Room on official business days between the hours of 10:00
a.m. and 3:00 p.m. Copies of the Amendments also will be available for
inspection and copying at the principal office of NASDAQ. 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 S7-24-89 and should be
submitted on or before October 28, 2014.

For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
---------------------------------------------------------------------------

\19\ 17 CFR 200.30-3(a)(27).
---------------------------------------------------------------------------

Kevin M. O'Neill,
Deputy Secretary.
[FR Doc. 2014-23838 Filed 10-6-14; 8:45 am]
BILLING CODE 8011-01-P

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