Self-Regulatory Organizations; C2 Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Fees for the C2 Book Depth Data Feed and Certain Other C2 Real-Time Data Feeds, 561-566 [2014-30890]
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Federal Register / Vol. 80, No. 3 / Tuesday, January 6, 2015 / Notices
tkelley on DSK3SPTVN1PROD with NOTICES
because the review must be reasonable
based on the nature and scope of the
activity in question and therefore
requires a factual review. FINRA
believes, however, that an annual
review for on-going payments generally
would be reasonable, absent evidence of
activities by the recipient of the
payments that raise red flags.88
IV. Discussion and Commission
Findings
The Commission has carefully
considered the proposal, the comments
received, and FINRA’s responses to the
comments. Based on its review of the
record, the Commission finds that the
proposal is consistent with the
requirements of the Act and the rules
and regulations thereunder applicable to
a national securities association.89
In particular, the Commission finds
that the proposed rule change is
consistent with the provisions of
Section 15A(b)(6) of the Act, which
requires, among other things, that
FINRA’s rules be designed to prevent
fraudulent and manipulative acts and
practices; promote just and equitable
principles of trade; and, in general,
protect investors and the public
interest.90
The proposed rule change will clarify
and streamline several NASD and NYSE
rules relating to payments to
unregistered persons for adoption as
FINRA Rules in the new Consolidated
FINRA Rulebook. Specifically, proposed
FINRA Rule 2040(a) aligns with Section
15(a) of the Exchange Act and its related
guidance to determine whether
registration as a broker-dealer is
required for certain persons to receive
transaction-related compensation;
proposed FINRA Rule 2040(b) codifies
existing FINRA guidance on the
payment by members of continuing
commissions to retiring registered
representatives consistent with the
Commission’s guidance in this area; and
proposed FINRA Rule 2040(c) adopts
the foreign finders provisions of NASD
Rule 1060(b) and NYSE Rule
Interpretation 345(a)(i)/03 with
technical changes. The amendments to
FINRA Rule 8311 eliminate duplicate
provisions in NASD IM–2420–2 and
clarify the scope of the rule on
payments by members to persons
subject to sanctions. Commenters’
suggestions that the SEC (or FINRA)
provide additional guidance on
‘‘finders’’ are outside the scope of this
88 Id.
89 In approving the proposal, as amended, the
Commission has considered the impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
90 15 U.S.C. 78o–3(b)(6).
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rule filing, and thus outside the scope
of this order.
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,91 that the
proposed rule change (SR–FINRA–
2014–037) be, and hereby is, approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.92
Brent J. Fields,
Secretary.
[FR Doc. 2014–30892 Filed 1–5–15; 8:45 am]
BILLING CODE 8011–01–P
561
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
SECURITIES AND EXCHANGE
COMMISSION
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
[Release No. 34–73956; File No. SR–C2–
2014–029]
1. Purpose
Self-Regulatory Organizations; C2
Options Exchange, Incorporated;
Notice of Filing and Immediate
Effectiveness of a Proposed Rule
Change Relating to Fees for the C2
Book Depth Data Feed and Certain
Other C2 Real-Time Data Feeds
December 30, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
17, 2014, C2 Options Exchange,
Incorporated (the ‘‘Exchange’’ or ‘‘C2’’)
filed with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
C2 Options Exchange, Incorporated
(the ‘‘Exchange’’ or ‘‘C2’’) proposes to
establish fees for the C2 Book Depth
Data Feed and amend fees for certain
other C2 real-time data feeds. The text
of the proposed rule change is available
on the Exchange’s Web site (https://
www.c2exchange.com/Legal/), at the
Exchange’s Office of the Secretary, and
at the Commission’s Public Reference
Room.
U.S.C. 78s(b)(2).
CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
The purpose of the proposed rule
change is to: (1) Establish fees for the C2
Book Depth Data Feed; (2) amend fees
for the C2 Complex Order Book (‘‘COB’’)
Data Feed; and (3) establish fees for
distribution of C2 data via a ‘‘Display
Only Service’’ (as defined below). These
data feeds are made available by C2’s
affiliate Market Data Express, LLC
(‘‘MDX’’).
BBO, Book Depth and COB Data Feeds
BBO Data Feed: The BBO Data Feed
is a real-time, low latency data feed that
includes the following content: (i)
Outstanding quotes and standing orders
at the best available price level on each
side of the market, with aggregate size
(‘‘BBO data’’), and last sale data 3; (ii)
totals of customer versus non-customer
contracts at the BBO, (iii) All-or-None
contingency orders priced better than or
equal to the BBO, (iv) BBO and last sale
data for complex strategies (e.g.,
spreads, straddles, buy-writes, etc.); (v)
expected opening price (‘‘EOP’’) and
expected opening size (‘‘EOS’’)
information that is disseminated prior to
the opening of the market and during
trading rotations, (vi) end-of-day
(‘‘EOD’’) summary messages that are
disseminated after the close of a trading
session that include summary
information about trading in C2 listed
options (i.e., product name, opening
price, high and low price during the
trading session and last sale price), (vii)
‘‘recap messages’’ that are disseminated
during a trading session any time there
is a change in the open, high, low or last
sale price of a C2 listed option, as well
as product name and total volume
91 15
92 17
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3 ‘‘Best bid and offer’’ or ‘‘BBO’’ data is sometimes
referred to as ‘‘top-of-book’’ data. Data with respect
to executed trades is referred to as ‘‘last sale’’ data.
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traded in the product during the trading
session; and (viii) product IDs and codes
for all C2 listed options contracts. The
data in the BBO Data Feed is refreshed
periodically during the trading session.
The BBO and last sale data contained in
the BBO Data Feed is identical to the
data sent to the Options Price Reporting
Authority (‘‘OPRA’’) for redistribution
to the public.4
Book Depth Data Feed: The Book
Depth Data Feed is a real-time, low
latency data feed that includes all
outstanding quotes and standing orders
up to the first five price levels on each
side of the market, with aggregate size
(‘‘Book Depth’’). The Book Depth Data
Feed includes all of the other data
contained in the BBO Data Feed (as
described above), including last sale,
BBO and Book Depth data for complex
strategies.5
COB Data Feed: The COB Data Feed
is a subset of the Book Depth Data Feed.
It is a real-time data feed that includes
data regarding the Exchange’s Complex
Order Book and related complex order
information. The COB Data Feed
includes BBO, Book Depth and last sale
data for all C2-traded complex order
strategies and identifies customer orders
and trades.
Fees
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BBO Data Feed Fees: MDX currently
charges a ‘‘Data Fee’’, payable by a
Customer, of $1,000 per month for
internal use and external redistribution
of the BBO Data Feed.6 The Data Fee
entitles a Customer to provide the BBO
Data Feed to an unlimited number of
internal users and Devices 7 within the
Customer. A Customer receiving the
BBO Data Feed from another Customer
is assessed the Data Fee by MDX
pursuant to its own market data
agreement with MDX, and is entitled to
use the Data internally and/or distribute
it externally.8 All Customers have the
4 MDX makes available to Customers the BBO
data and last sale data that is included in the BBO
Data Feed no earlier than the time at which the
Exchange sends that data to OPRA.
5 See Securities Exchange Act Release No. 71773
(March 24, 2014), 79 FR 17611 (March 28, 2014).
6 A BBO Data Feed ‘‘Customer’’ is currently
defined as any entity that receives the BBO Data
Feed either directly from MDX’s system or through
a connection to MDX provided by an approved
redistributor (i.e., a market data vendor or an
extranet service provider) and distributes it
externally or uses it internally. The MDX fee
schedule for CBOE data is located at https://
www.cboe.org/MDX/CSM/OBOOKMain.aspx.
7 A ‘‘Device’’ means any computer, workstation or
other item of equipment, fixed or portable, that
receives, accesses and/or displays data in visual,
audible or other form.
8 A Customer may choose to receive the data from
another Customer rather than directly from MDX’s
system because it does not want to or is not
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same rights to utilize the data internally
and/or distribute it externally as long as
the Customer has entered into a written
agreement with MDX for the data and
pays the Data Fee.
The Exchange is not proposing to
amend the Data Fee. The Exchange
proposes to establish a ‘‘User Fee’’,
payable by a Customer, of $50 per
month per Device or user ID for use of
data in the BBO Data Feed by ‘‘Display
Only Service’’ users. A ‘‘Display Only
Service’’ would allow a natural person
end-user to view and manipulate data
using a Customer’s computerized
service, but not to save, copy, export or
transfer the data or any results of the
manipulation to any other computer
hardware, software or media, except for
printing it to paper or other nonmagnetic media. User fees would be
payable only for ‘‘external’’ Display
Only Service users (Devices or user IDs
of users who are not employees or
natural person independent contractors
of the Customer, the Customer’s
affiliates or an authorized service
facilitator).
The Exchange proposes to amend the
definition of a ‘‘Customer’’ to make it
uniformly applicable to the BBO Data
Feed and the other C2 real-time data
feeds described above. The term
‘‘Customer’’ would mean any person,
company or other entity that, pursuant
to a market data agreement with MDX,
is entitled to receive data, either directly
from MDX or through an authorized
redistributor (i.e., a Customer or an
extranet service provider), whether that
data is distributed externally or used
internally. An entity or person that
receives BBO data from a Customer
through a Display Only Service is not a
‘‘Customer’’ unless it has a market data
agreement in place with MDX.
Book Depth Data Feed Fees: The
Exchange proposes to amend the MDX
fee schedule to establish fees for the
Book Depth Data Feed. MDX would
charge a ‘‘Data Fee’’, payable by a
Customer (as defined above), of $1,000
per month for internal use and external
redistribution of the Book Depth Data
Feed. The Data Fee for the Book Depth
Data Feed would entitle a Customer to
provide the Book Depth Data Feed to an
unlimited number of internal users and
Devices within the Customer. A
Customer receiving the Book Depth Data
Feed from another Customer would be
assessed the Data Fee by MDX pursuant
to its own market data agreement with
MDX, and would be entitled to use the
Data internally and/or distribute it
externally. All Customers would have
equipped to manage the technology necessary to
establish a direct connection to MDX.
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the same rights to utilize the Book
Depth data internally and/or distribute
it externally as long as the Customer has
entered into a written agreement with
MDX for the data and pays the Data Fee.
BBO Data Feed Customers could
upgrade to become Book Depth Data
Feed Customers without paying any
additional Data Fee.9
MDX would also charge a Book Depth
Data Feed Customer a User Fee of $50
per month per Device or user ID for use
of the data in the Book Depth Data Feed
by Display Only Service users (as
defined above). User Fees would be
payable only for ‘‘external’’ Display
Only Service Users (as defined above).
An entity or person that receives Book
Depth data from a Customer through a
Display Only Service is not a
‘‘Customer’’ unless it has a market data
agreement in place with MDX.
COB Data Feed Fees: MDX currently
charges Customers of the COB Data Feed
a Data Fee of $500 per month plus
applicable User Fees.10 The Data Fee for
the COB Data Feed is waived for
Customers of the BBO Data Feed.11
MDX currently charges a Customer
User Fees of $25 per month per Device
or user ID for receipt of the data by
‘‘Professional Users’’ 12 and $1 per
month for receipt of the data by ‘‘NonProfessional Users.’’ 13 User Fees are
9 Such Customers would still be subject to
Display Only Service User Fees as described below.
10 A COB Data Feed Customer is currently defined
as any entity that receives the COB Data Feed,
either directly from MDX’s system or through a
connection to MDX provided by an approved
redistributor (i.e., a market data vendor or an
extranet service provider), and distributes it
externally or uses it internally, except that an entity
or person that receives the COB Data Feed from a
Customer and only uses it internally is not a
‘‘Customer’’ if it receives the COB Data Feed from
a Customer subject to a form of ‘‘Subscriber
Agreement’’ that has been approved by MDX.
11 Such COB Data Feed Customers are still subject
to User Fees as described below.
12 A ‘‘Professional User’’ is any natural person
recipient of Data who is not a Non-Professional
User. User Fees for Professional Users are payable
for both ‘‘internal’’ Professional Users (Devices or
user IDs of employees of a Customer) and
‘‘external’’ Professional Users (Devices or user IDs
of Professional Users who receive the Data from a
Customer and are not employed by the Customer).
(Non-Professional Users must be external since a
person who uses the COB Data Feed for a
commercial purpose cannot be a Non-Professional
User.)
13 A ‘‘Non-Professional User’’ is a natural person
who uses the COB Data Feed only for personal
purposes and not for any commercial purpose and
who, if he or she works in the United States, is not:
(i) Registered or qualified in any capacity with the
Securities and Exchange Commission, the
Commodities Futures Trading Commission, any
state securities agency, any securities exchange or
association, or any commodities or futures contract
market or association; (ii) engaged as an
‘‘investment adviser’’ as that term is defined in
Section 201(11) of the Investment Advisors Act of
1940 (whether or not registered or qualified under
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subject to a cap of $500 per month (i.e.,
a Customer pays no more than $500 in
User Fees for a given month).
The Exchange proposes to reduce the
Data Fee from $500 per month to $100
per month. The Data Fee would be
waived for Customers of the Book Depth
Data Feed. The Exchange proposes to
reduce the User Fee for NonProfessional Users from $1 per month to
zero.14 For the purpose of consistency,
the Exchange proposes to amend the
definition of a COB Data Feed Customer
so that it is the same definition that is
applicable to the BBO and Book Depth
Data Feeds.
Systems Fees: MDX currently charges
a Port Fee of $500 per data port per
month for receipt of a data feed through
a connection to MDX. The Exchange
proposes to amend the MDX Fee
Schedule to clarify how the Port Fee is
assessed. First, the Exchange proposes
to clarify that the Port Fee applies to the
receipt of any data feed through a
connection to MDX, not only for the
receipt of the BBO Data Feed. Second,
the Exchange proposes to amend the
description of the fee to clarify that it is
payable by any Customer that receives
data through a direct connection to
MDX or through a connection to MDX
provided by an extranet service
provider. Lastly, the Exchange proposes
to clarify that the port fee applies to
receipt of any data feed but is only
assessed once per data port. For
that Act); or (iii) employed by a bank or other
organization exempt from registration under federal
or state securities laws to perform functions that
would require registration or qualification if such
functions were performed for an organization not so
exempt; or, if he or she works outside of the United
States, does not perform the same functions as
someone who would qualify as a Non-Professional
User if he or she worked in the United States.
14 The Exchange proposes to amend the definition
of ‘‘Non-Professional User’’ so that it is consistent
with the definition of ‘‘Non-Professional User’’ used
by OPRA. See OPRA Addendum for
Nonprofessionals, which is part of Attachments
B–1 and B–2 to OPRA’s Vendor Agreement. A
‘‘Non-Professional User’’ would mean a natural
person or qualifying trust that uses Data only for
personal purposes and not for any commercial
purpose and, for a natural person who works in the
United States, is not: (i) Registered or qualified in
any capacity with the Securities and Exchange
Commission, the Commodities Futures Trading
Commission, any state securities agency, any
securities exchange or association, or any
commodities or futures contract market or
association; (ii) engaged as an ‘‘investment adviser’’
as that term is defined in Section 201(11) of the
Investment Advisors Act of 1940 (whether or not
registered or qualified under that Act); or (iii)
employed by a bank or other organization exempt
from registration under federal or state securities
laws to perform functions that would require
registration or qualification if such functions were
performed for an organization not so exempt; or, for
a natural person who works outside of the United
States, does not perform the same functions as
would disqualify such person as a Non-Professional
User if he or she worked in the United States.
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example, if a Customer receives two
data feeds over the same port, the Port
Fee is only assessed once for that port.
The Exchange also proposes to delete
from the MDX Fee Schedule the
statements that MDX will not charge
fees for any of the data feeds (or the port
fee) for any calendar month in which
Customer commences receipt of the data
after the 15th day of the month (or in
the case of the port fee, establishes the
connection after the 15th day of the
month) or discontinues receipt of the
data before the 15th day of the month
(or in the case of the port fee,
disconnects before the 15th day of the
month). The Exchange believes it would
be more appropriate for billing policies
to be located within MDX’s written
agreement with Customers.
All of the proposed fee changes would
be effective on January 1, 2015.
2. Statutory Basis
The Exchange believes the proposed
rule change is consistent with the
Securities Exchange Act of 1934 (the
‘‘Act’’) and the rules and regulations
thereunder applicable to the Exchange
and, in particular, the requirements of
Section 6(b) of the Act.15 Specifically,
the Exchange believes the proposed rule
change is consistent with Section 6(b)(4)
of the Act,16 which requires that
Exchange rules provide for the equitable
allocation of reasonable dues, fees, and
other charges among its Trading Permit
Holders and other persons using its
facilities. The Exchange also believes
the proposed rule change is consistent
with the Section 6(b)(5) 17 requirement
that the rules of an exchange not be
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
BBO Data Fees
The Exchange believes the proposed
Display Only Service User Fee for the
BBO Data Feed is equitable and not
unfairly discriminatory because it
would apply equally to all Customers
that distribute data via a Display Only
Service. The Exchange believes the
proposed User Fee is reasonable because
it compares favorably to usage fees that
other markets charge for similar
products. For example, NASDAQ OMX
PHLX charges a $40 per month
Professional Subscriber Fee for use of its
market data products by each of internal
and external users. The International
Securities Exchange charges a $20 per
month Controlled Device Fee for use of
its Top Quote Feed and a separate $25
15 15
16 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4).
17 Id.
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563
per month Controlled Device Fee for use
of its Spread Feed. NYSE charges a $50
per month Professional User Fee for use
of each of its NYSE ArcaBook for Amex
Options and NYSE ArcaBook for Arca
Options market data products that
include top-of-book and last sale data
similar to the data in the BBO Data
Feed.
The Exchange believes it is equitable
and not unfairly discriminatory to
charge a lower fee for use of BBO data
via a Display Only Service because such
use would be limited to display use
only. The Display Only Service would
only allow a natural person end-user to
view and manipulate data using the
Customer’s computerized service, but
not to save, copy, export or transfer the
data or any results of the manipulation
to any other computer hardware,
software or media, except for printing it
to paper or other non-magnetic media.
The Exchange notes other exchanges
charge fees for market data products
based on distinctions between ‘‘display’’
and ‘‘non-display’’ usage.18
Book Depth Data Fees
The Exchange believes the proposed
Data Fee for the Book Depth Data Feed
is equitable and not unfairly
discriminatory because it would apply
equally to all Customers. All Customers
would have the same rights to utilize
the data (i.e., use the data internally
and/or distribute it externally) as long as
the Customer has entered into a market
data agreement with MDX for the data
and pays the Data Fee.
The Exchange believes the proposed
Data Fee is reasonable because it
compares favorably to fees that other
markets charge for similar products. For
example, BATS BZX Exchange charges
a $1,000 per month Internal Use Access
Fee and a $5,000 per month External
Distribution Access Fee for Multicast
PITCH, which is its depth of market and
last sale feed. NASDAQ OMX PHLX
charges Internal Distributors a monthly
fee of $4,000 and External Distributors
a monthly fee of a $4,500 for its Depth
of Market data feed that includes full
depth of quotes and orders and last sale
data for options listed on PHLX. NYSE
charges a $3,000 per month Access Fee
and $2,000 per month External
Redistribution fee for each of its NYSE
ArcaBook for Amex Options and NYSE
18 See e.g., Securities Exchange Act Release No.
69554 (May 10, 2013), 78 FR 28917 (May 16, 2013),
(SR–NYSEArca–2013–47); Securities Exchange Act
Release No. 69553 (May 10, 2013), 78 FR 28926
(May 16, 2013), (SR–NYSEMKT–2013–40);
Securities Exchange Act Release No. 68576 (January
3, 2013), 78 FR 1886 (January 9, 2013), (SR–PHLX–
2012–145); and Securities Exchange Act Release
No. 64652 (June 13, 2011), 76 FR 35498 (June 17,
2011), (SR–NASDAQ–2011–45).
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ArcaBook for Arca Options market data
products that include top-of-book, last
sale and depth of quote data.
The Exchange believes the proposal to
allow BBO Data Feed Customers to
upgrade to become Book Depth Data
Feed Customers without any additional
Data Fee is equitable and not unfairly
discriminatory because it would apply
equally to all BBO Data Feed Customers.
BBO Data Feed Customers currently pay
MDX $1,000 per month for the right to
use and redistribute the data in the BBO
Data Feed. The Book Depth Data Feed
includes all of the data in the BBO Data
Feed. The proposed fee arrangement
would allow a Book Depth Data Feed
Customer who has upgraded from a
BBO Data Feed to use and redistribute
Book Depth data for no additional
charge, thereby incentivizing further
redistribution of the data in the Book
Depth Data Feed. The Exchange notes
other exchanges offer similar fee
arrangements.19
The Exchange believes the proposed
Display Only Service User Fee for the
Book Depth Data Feed is equitable and
not unfairly discriminatory because it
would apply equally to all Customers
that distribute data via a Display Only
Service. The Exchange believes the
proposed User Fee is reasonable because
it compares favorably to usage fees that
other markets charge for similar
products. For example, NASDAQ OMX
PHLX charges a $40 per month
Professional Subscriber Fee for use of its
market data products by each of internal
and external users. The International
Securities Exchange charges a $50 per
month Controlled Device Fee for use of
its Depth of Market Feed. NYSE charges
a $50 per month Professional User Fee
for use of each of its NYSE ArcaBook for
Amex Options and NYSE ArcaBook for
Arca Options market data products.
The Exchange believes it is equitable
and not unfairly discriminatory to
charge a lower fee for use of Book Depth
data via a Display Only Service because
such use would be limited to display
use only. The Display Only Service
would only allow a natural person enduser to view and manipulate data using
the Customer’s computerized service,
but not to save, copy, export or transfer
19 For example, the Exchange believes the
NASDAQ Options Market charges only one
distributor fee to allow a subscriber access to its
‘‘NASDAQ ITCH-to-Trade Options’’ (ITTO) and
‘‘Best of NASDAQ Options’’ (BONO) products. The
Exchange believes NASDAQ OMX BX charges only
one distributor fee to allow a subscriber access to
its ‘‘BX Options Depth of Market’’ (BX Depth) and
‘‘BX Options Top of Market’’ (BX Top) products. In
addition, the Exchange believes the International
Securities Exchange charges no additional fee to
subscribers of its ‘‘Depth of Market’’ Feed that also
access its Top Quote Feed.
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the data or any results of the
manipulation to any other computer
hardware, software or media, except for
printing it to paper or other nonmagnetic media. As noted above, other
exchanges charge fees for market data
products based on distinctions between
‘‘display’’ and ‘‘non-display’’ usage.20
COB Data Fees: The Exchange
believes the proposed reductions of the
Data Fee and Non-professional User Fee
for the COB Data Feed are equitable and
not unfairly discriminatory because they
would apply equally to all Customers of
the COB Data Feed. The Exchange
believes the proposed Data Fee is
reasonable because it compares
favorably to fees that other markets
charge for similar products. For
example, as noted above, the
International Securities Exchange
charges distributors of its Spread Feed
a base monthly fee of $3,000. The
proposed lower Data Fee may permit
wider distribution of the COB Data Feed
at a lower cost to Customers, and the
reduced User Fee may make it less
costly for Customers to distribute data to
Non-professional Users, thereby
benefitting both Customers and Nonprofessional Users, including public
investors.
The Exchange believes the proposal to
allow Book Depth Data Feed Customers
to become COB Data Feed Customers
without any additional Data Fee is
equitable and not unfairly
discriminatory because it would apply
equally to all Book Depth Data Feed
Customers. Book Depth Data Feed
Customers would pay MDX $1,000 per
month for the right to use and
redistribute the data in the Book Depth
Data Feed. The COB Data Feed is a
subset of the Book Depth Data Feed. The
proposed fee arrangement would allow
a Book Depth Data Feed Customer to use
and redistribute the COB Data Feed for
no additional charge, thereby
incentivizing further redistribution of
the data in the COB Data Feed. The
Exchange notes other exchanges offer
similar fee arrangements.21
Systems Fees and Billing Policy: The
Exchange believes the proposed changes
to the description of the Port Fee are
equitable, reasonable and not unfairly
discriminatory because they would
benefit all Customers by clarifying how
the Port Fee is assessed. The Exchange
believes removing the billing policy
from the MDX Fee Schedule is
equitable, reasonable and not unfairly
discriminatory because MDX believes it
would be more appropriate for billing
policies to be located within MDX’s
20 Supra
21 Supra
PO 00000
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footnote 19.
Frm 00084
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written agreement with Customers along
with other policies related to MDX’s
market data services.
For the reasons cited above, the
Exchange believes the proposed fees for
the BBO, Book Depth and COB Data
Feeds are equitable, reasonable and not
unfairly discriminatory. In addition, the
Exchange believes that no substantial
countervailing basis exists to support a
finding that the proposed fees for the
BBO, Book Depth and COB Data Feeds
fail to meet the requirements of the Act.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
C2 does not believe that the proposed
rule change will impose any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act.
An exchange’s ability to price its
proprietary data feed products is
constrained by (1) the existence of
actual competition for the sale of such
data, (2) the joint product nature of
exchange platforms, and (3) the
existence of alternatives to proprietary
data.
The Existence of Actual Competition.
The Exchange believes competition
provides an effective constraint on the
market data fees that the Exchange,
through MDX, has the ability and the
incentive to charge. C2 has a compelling
need to attract order flow from market
participants in order to maintain its
share of trading volume. This
compelling need to attract order flow
imposes significant pressure on C2 to
act reasonably in setting its fees for
market data, particularly given that the
market participants that will pay such
fees often will be the same market
participants from whom C2 must attract
order flow. These market participants
include broker-dealers that control the
handling of a large volume of customer
and proprietary order flow. Given the
portability of order flow from one
exchange to another, any exchange that
sought to charge unreasonably high data
fees would risk alienating many of the
same customers on whose orders it
depends for competitive survival. C2
currently competes with eleven options
exchanges (including C2’s affiliate,
Chicago Board Options Exchange) for
order flow.22
In addition, in the case of products
that are distributed through market data
vendors, the market data vendors
22 The Commission has previously made a finding
that the options industry is subject to significant
competitive forces. See e.g., Securities Exchange
Act Release No. 59949 (May 20, 2009), 74 FR 25593
(May 28, 2009) (SR–ISE–2009–97) (order approving
ISE’s proposal to establish fees for a real-time depth
of market data offering).
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06JAN1
tkelley on DSK3SPTVN1PROD with NOTICES
Federal Register / Vol. 80, No. 3 / Tuesday, January 6, 2015 / Notices
themselves provide additional price
discipline for proprietary data products
because they control the primary means
of access to certain end users. These
vendors impose price discipline based
upon their business models. For
example, vendors that assess a
surcharge on data they sell are able to
refuse to offer proprietary products that
their end users do not or will not
purchase in sufficient numbers. Internet
portals, such as Google, impose price
discipline by providing only data that
they believe will enable them to attract
‘‘eyeballs’’ that contribute to their
advertising revenue. Similarly,
Customers will not offer the BBO, Book
Depth or COB Data Feeds unless these
products will help them maintain
current users or attract new ones. For
example, a broker-dealer will not choose
to offer the BBO, Book Depth or COB
Data Feeds to its retail customers unless
the broker-dealer believes that the retail
customers will use and value the data
and the provision of such data will help
the broker-dealer maintain the customer
relationship, which allows the brokerdealer to generate profits for itself.
Professional users will not request any
of these feeds from Customers unless
they can use the data for profitgenerating purposes in their businesses.
All of these operate as constraints on
pricing proprietary data products.
Joint Product Nature of Exchange
Platform. Transaction execution and
proprietary data products are
complementary in that market data is
both an input and a byproduct of the
execution service. In fact, market data
and trade executions are a paradigmatic
example of joint products with joint
costs. The decision whether and on
which platform to post an order will
depend on the attributes of the
platforms where the order can be
posted, including the execution fees,
data quality, and price and distribution
of their data products. The more trade
executions a platform does, the more
valuable its market data products
become. The costs of producing market
data include not only the costs of the
data distribution infrastructure, but also
the costs of designing, maintaining, and
operating the exchange’s transaction
execution platform and the cost of
regulating the exchange to ensure its fair
operation and maintain investor
confidence. The total return that a
trading platform earns reflects the
revenues it receives from both products
and the joint costs it incurs. Moreover,
an exchange’s broker-dealer customers
view the costs of transaction executions
and market data as a unified cost of
doing business with the exchange.
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Analyzing the cost of market data
product production and distribution in
isolation from the cost of all of the
inputs supporting the creation of market
data and market data products will
inevitably underestimate the cost of the
data and data products. Thus, because it
is impossible to obtain the data inputs
to create market data products without
a fast, technologically robust, and wellregulated execution system, system
costs and regulatory costs affect the
price of both obtaining the market data
itself and creating and distributing
market data products. It would be
equally misleading, however, to
attribute all of an exchange’s costs to the
market data portion of an exchange’s
joint products. Rather, all of an
exchange’s costs are incurred for the
unified purposes of attracting order
flow, executing and/or routing orders,
and generating and selling data about
market activity. The total return that an
exchange earns reflects the revenues it
receives from the joint products and the
total costs of the joint products.
The level of competition and
contestability in the market is evident in
the numerous alternative venues that
compete for order flow, including 12
options self-regulatory organization
(‘‘SRO’’) markets, as well as
internalizing broker-dealers (‘‘BDs’’) and
various forms of alternative trading
systems (‘‘ATSs’’), including dark pools
and electronic communication networks
(‘‘ECNs’’). Competition among trading
platforms can be expected to constrain
the aggregate return that each platform
earns from the sale of its joint products,
but different platforms may choose from
a range of possible, and equally
reasonable, pricing strategies as the
means of recovering total costs. For
example, some platforms may choose to
pay rebates to attract orders, charge
relatively low prices for market data
products (or provide market data
products free of charge), and charge
relatively high prices for accessing
posted liquidity. Other platforms may
choose a strategy of paying lower
rebates (or no rebates) to attract orders,
setting relatively high prices for market
data products, and setting relatively low
prices for accessing posted liquidity. In
this environment, there is no economic
basis for regulating maximum prices for
one of the joint products in an industry
in which suppliers face competitive
constraints with regard to the joint
offering.
The Existence of Alternatives. C2 is
constrained in pricing the BBO, Book
Depth and COB Data Feeds by the
availability to market participants of
alternatives to purchasing these
products. C2 must consider the extent to
PO 00000
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565
which market participants would
choose one or more alternatives instead
of purchasing the exchange’s data. Other
options exchanges can and have
produced their own top-of-book, book
depth and complex strategies market
data products, and thus are sources of
potential competition for MDX. For
example, as noted above, BATS, ISE,
NASDAQ OMX PHLX and NYSE offer
market data products that compete with
the BBO, Book Depth and COB Data
Feeds. The large number of SROs, BDs,
and ATSs that currently produce
proprietary data or are currently capable
of producing it provides further pricing
discipline for proprietary data products.
Each SRO, ATS, and BD is currently
permitted to produce proprietary data
products, and many currently do. In
addition, the OPRA data feed is a
significant competitive alternative to the
BBO and last sale data included in the
BBO and Book Depth Data Feeds.
Further, data products are valuable to
professional users only if they can be
used for profit-generating purposes in
their businesses and valuable to nonprofessional users only insofar as they
provide information that such users
expect will assist them in tracking
prices and market trends and making
trading decisions.
The existence of numerous
alternatives to the Exchange’s products,
including proprietary data from other
sources, ensures that the Exchange
cannot set unreasonable fees, or fees
that are unreasonably discriminatory,
when vendors and subscribers can elect
these alternatives or choose not to
purchase a specific proprietary data
product if its cost to purchase is not
justified by the returns any particular
vendor or subscriber would achieve
through the purchase.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 23 and paragraph (f) of Rule
19b–4 24 thereunder. At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
23 15
24 17
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CFR 240.19b–4(f).
06JAN1
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Federal Register / Vol. 80, No. 3 / Tuesday, January 6, 2015 / Notices
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission will institute proceedings
to determine whether the proposed rule
change should be approved or
disapproved.
2014–029 and should be submitted on
or before January 27, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.25
Brent J. Fields,
Secretary.
[FR Doc. 2014–30890 Filed 1–5–15; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
C2–2014–029 on the subject line.
tkelley on DSK3SPTVN1PROD with NOTICES
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending the Bylaws of
the Exchange’s Ultimate Parent
Company, Intercontinental Exchange,
Inc., To Designate Its Chief Strategic
Officer, Chief Technology Officer and
General Counsel as ‘‘Senior Officers’’
of ICE
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 SR–C2–2014–029. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549 on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–C2–
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19:38 Jan 05, 2015
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SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–73964; File No. SR–
NYSEMKT–2014–107]
December 30, 2014.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that, on December
22, 2014, NYSE MKT LLC (the
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I and II below, which Items have
been prepared by the self-regulatory
organization. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
Bylaws (the ‘‘ICE Bylaws’’) of the
Exchange’s ultimate parent company,
Intercontinental Exchange, Inc. (‘‘ICE’’),
to designate its Chief Strategic Officer,
Chief Technology Officer and General
Counsel as ‘‘Senior Officers’’ of ICE. The
text of the proposed rule change is
available on the Exchange’s Web site at
www.nyse.com, at the principal office of
the Exchange, and at the Commission’s
Public Reference Room.
25 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
PO 00000
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Sfmt 4703
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization included
statements concerning the purpose of,
and basis for, the proposed rule change
and discussed any comments it received
on the proposed rule change. The text
of those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange seeks approval for its
ultimate parent entity ICE 3 to amend
the ICE Bylaws to designate its Chief
Strategic Officer, Chief Technology
Officer and General Counsel (each, a
‘‘Designated Officer’’ and together, the
‘‘Designated Officers’’) as ‘‘Senior
Officers’’ of ICE. Each Designated
Officer was a Senior Officer under the
ICE Bylaws prior to the acquisition by
ICE of NYSE Euronext in 2013 because
each also was a Senior Vice President.
Under the ICE Bylaws, all Senior Vice
Presidents are Senior Officers. As Senior
Officers, the Designated Officers were
entitled under Article X, Section 10.6 of
the ICE Bylaws to indemnification by
ICE against certain actions, suits and
proceedings.
Upon consummation of the
acquisition of NYSE Euronext, the three
titles were streamlined and the term
‘‘Senior Vice President’’ was eliminated.
Specifically, the officer whose former
title was ‘‘Senior Vice President, Chief
Strategic Officer’’ is now ‘‘Chief
Strategic Officer’’; the officer whose
former title was ‘‘Senior Vice President,
Chief Technology Officer’’ is now
‘‘Chief Technology Officer’’; and the
officer whose title was formerly ‘‘Senior
Vice President, General Counsel’’ is now
‘‘General Counsel’’. The proposed
amendment to the ICE Bylaws would
assure that the Designated Officers
continue to be identified as ‘‘Senior
3 ICE owns 100% of the equity interest in ICE
Holdings, Inc. (‘‘ICE Holdings’’), which in turn
owns 100% of the equity interest in NYSE
Holdings, LLC (‘‘NYSE Holdings’’). NYSE Holdings
owns 100% of the equity interest of NYSE Group,
Inc., which in turn directly or indirectly owns
100% of the equity interest of three registered
national securities exchanges and self-regulatory
organizations—the Exchange, the New York Stock
Exchange, LLC (‘‘NYSE’’) and NYSE MKT LLC
(‘‘NYSE MKT’’) [sic].
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]]>Agencies
[Federal Register Volume 80, Number 3 (Tuesday, January 6, 2015)]
[Notices]
[Pages 561-566]
From the Federal Register Online via the Government Printing Office [www.gpo.gov]
[FR Doc No: 2014-30890]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-73956; File No. SR-C2-2014-029]
Self-Regulatory Organizations; C2 Options Exchange, Incorporated;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
Relating to Fees for the C2 Book Depth Data Feed and Certain Other C2
Real-Time Data Feeds
December 30, 2014.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 17, 2014, C2 Options Exchange, Incorporated (the
``Exchange'' or ``C2'') filed with the Securities and Exchange
Commission (the ``Commission'') the proposed rule change as described
in Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
C2 Options Exchange, Incorporated (the ``Exchange'' or ``C2'')
proposes to establish fees for the C2 Book Depth Data Feed and amend
fees for certain other C2 real-time data feeds. The text of the
proposed rule change is available on the Exchange's Web site (https://www.c2exchange.com/Legal/), at the Exchange's Office of the Secretary,
and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to: (1) Establish fees
for the C2 Book Depth Data Feed; (2) amend fees for the C2 Complex
Order Book (``COB'') Data Feed; and (3) establish fees for distribution
of C2 data via a ``Display Only Service'' (as defined below). These
data feeds are made available by C2's affiliate Market Data Express,
LLC (``MDX'').
BBO, Book Depth and COB Data Feeds
BBO Data Feed: The BBO Data Feed is a real-time, low latency data
feed that includes the following content: (i) Outstanding quotes and
standing orders at the best available price level on each side of the
market, with aggregate size (``BBO data''), and last sale data \3\;
(ii) totals of customer versus non-customer contracts at the BBO, (iii)
All-or-None contingency orders priced better than or equal to the BBO,
(iv) BBO and last sale data for complex strategies (e.g., spreads,
straddles, buy-writes, etc.); (v) expected opening price (``EOP'') and
expected opening size (``EOS'') information that is disseminated prior
to the opening of the market and during trading rotations, (vi) end-of-
day (``EOD'') summary messages that are disseminated after the close of
a trading session that include summary information about trading in C2
listed options (i.e., product name, opening price, high and low price
during the trading session and last sale price), (vii) ``recap
messages'' that are disseminated during a trading session any time
there is a change in the open, high, low or last sale price of a C2
listed option, as well as product name and total volume
[[Page 562]]
traded in the product during the trading session; and (viii) product
IDs and codes for all C2 listed options contracts. The data in the BBO
Data Feed is refreshed periodically during the trading session. The BBO
and last sale data contained in the BBO Data Feed is identical to the
data sent to the Options Price Reporting Authority (``OPRA'') for
redistribution to the public.\4\
---------------------------------------------------------------------------
\3\ ``Best bid and offer'' or ``BBO'' data is sometimes referred
to as ``top-of-book'' data. Data with respect to executed trades is
referred to as ``last sale'' data.
\4\ MDX makes available to Customers the BBO data and last sale
data that is included in the BBO Data Feed no earlier than the time
at which the Exchange sends that data to OPRA.
---------------------------------------------------------------------------
Book Depth Data Feed: The Book Depth Data Feed is a real-time, low
latency data feed that includes all outstanding quotes and standing
orders up to the first five price levels on each side of the market,
with aggregate size (``Book Depth''). The Book Depth Data Feed includes
all of the other data contained in the BBO Data Feed (as described
above), including last sale, BBO and Book Depth data for complex
strategies.\5\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 71773 (March 24,
2014), 79 FR 17611 (March 28, 2014).
---------------------------------------------------------------------------
COB Data Feed: The COB Data Feed is a subset of the Book Depth Data
Feed. It is a real-time data feed that includes data regarding the
Exchange's Complex Order Book and related complex order information.
The COB Data Feed includes BBO, Book Depth and last sale data for all
C2-traded complex order strategies and identifies customer orders and
trades.
Fees
BBO Data Feed Fees: MDX currently charges a ``Data Fee'', payable
by a Customer, of $1,000 per month for internal use and external
redistribution of the BBO Data Feed.\6\ The Data Fee entitles a
Customer to provide the BBO Data Feed to an unlimited number of
internal users and Devices \7\ within the Customer. A Customer
receiving the BBO Data Feed from another Customer is assessed the Data
Fee by MDX pursuant to its own market data agreement with MDX, and is
entitled to use the Data internally and/or distribute it externally.\8\
All Customers have the same rights to utilize the data internally and/
or distribute it externally as long as the Customer has entered into a
written agreement with MDX for the data and pays the Data Fee.
---------------------------------------------------------------------------
\6\ A BBO Data Feed ``Customer'' is currently defined as any
entity that receives the BBO Data Feed either directly from MDX's
system or through a connection to MDX provided by an approved
redistributor (i.e., a market data vendor or an extranet service
provider) and distributes it externally or uses it internally. The
MDX fee schedule for CBOE data is located at https://www.cboe.org/MDX/CSM/OBOOKMain.aspx.
\7\ A ``Device'' means any computer, workstation or other item
of equipment, fixed or portable, that receives, accesses and/or
displays data in visual, audible or other form.
\8\ A Customer may choose to receive the data from another
Customer rather than directly from MDX's system because it does not
want to or is not equipped to manage the technology necessary to
establish a direct connection to MDX.
---------------------------------------------------------------------------
The Exchange is not proposing to amend the Data Fee. The Exchange
proposes to establish a ``User Fee'', payable by a Customer, of $50 per
month per Device or user ID for use of data in the BBO Data Feed by
``Display Only Service'' users. A ``Display Only Service'' would allow
a natural person end-user to view and manipulate data using a
Customer's computerized service, but not to save, copy, export or
transfer the data or any results of the manipulation to any other
computer hardware, software or media, except for printing it to paper
or other non-magnetic media. User fees would be payable only for
``external'' Display Only Service users (Devices or user IDs of users
who are not employees or natural person independent contractors of the
Customer, the Customer's affiliates or an authorized service
facilitator).
The Exchange proposes to amend the definition of a ``Customer'' to
make it uniformly applicable to the BBO Data Feed and the other C2
real-time data feeds described above. The term ``Customer'' would mean
any person, company or other entity that, pursuant to a market data
agreement with MDX, is entitled to receive data, either directly from
MDX or through an authorized redistributor (i.e., a Customer or an
extranet service provider), whether that data is distributed externally
or used internally. An entity or person that receives BBO data from a
Customer through a Display Only Service is not a ``Customer'' unless it
has a market data agreement in place with MDX.
Book Depth Data Feed Fees: The Exchange proposes to amend the MDX
fee schedule to establish fees for the Book Depth Data Feed. MDX would
charge a ``Data Fee'', payable by a Customer (as defined above), of
$1,000 per month for internal use and external redistribution of the
Book Depth Data Feed. The Data Fee for the Book Depth Data Feed would
entitle a Customer to provide the Book Depth Data Feed to an unlimited
number of internal users and Devices within the Customer. A Customer
receiving the Book Depth Data Feed from another Customer would be
assessed the Data Fee by MDX pursuant to its own market data agreement
with MDX, and would be entitled to use the Data internally and/or
distribute it externally. All Customers would have the same rights to
utilize the Book Depth data internally and/or distribute it externally
as long as the Customer has entered into a written agreement with MDX
for the data and pays the Data Fee. BBO Data Feed Customers could
upgrade to become Book Depth Data Feed Customers without paying any
additional Data Fee.\9\
---------------------------------------------------------------------------
\9\ Such Customers would still be subject to Display Only
Service User Fees as described below.
---------------------------------------------------------------------------
MDX would also charge a Book Depth Data Feed Customer a User Fee of
$50 per month per Device or user ID for use of the data in the Book
Depth Data Feed by Display Only Service users (as defined above). User
Fees would be payable only for ``external'' Display Only Service Users
(as defined above). An entity or person that receives Book Depth data
from a Customer through a Display Only Service is not a ``Customer''
unless it has a market data agreement in place with MDX.
COB Data Feed Fees: MDX currently charges Customers of the COB Data
Feed a Data Fee of $500 per month plus applicable User Fees.\10\ The
Data Fee for the COB Data Feed is waived for Customers of the BBO Data
Feed.\11\
---------------------------------------------------------------------------
\10\ A COB Data Feed Customer is currently defined as any entity
that receives the COB Data Feed, either directly from MDX's system
or through a connection to MDX provided by an approved redistributor
(i.e., a market data vendor or an extranet service provider), and
distributes it externally or uses it internally, except that an
entity or person that receives the COB Data Feed from a Customer and
only uses it internally is not a ``Customer'' if it receives the COB
Data Feed from a Customer subject to a form of ``Subscriber
Agreement'' that has been approved by MDX.
\11\ Such COB Data Feed Customers are still subject to User Fees
as described below.
---------------------------------------------------------------------------
MDX currently charges a Customer User Fees of $25 per month per
Device or user ID for receipt of the data by ``Professional Users''
\12\ and $1 per month for receipt of the data by ``Non-Professional
Users.'' \13\ User Fees are
[[Page 563]]
subject to a cap of $500 per month (i.e., a Customer pays no more than
$500 in User Fees for a given month).
---------------------------------------------------------------------------
\12\ A ``Professional User'' is any natural person recipient of
Data who is not a Non-Professional User. User Fees for Professional
Users are payable for both ``internal'' Professional Users (Devices
or user IDs of employees of a Customer) and ``external''
Professional Users (Devices or user IDs of Professional Users who
receive the Data from a Customer and are not employed by the
Customer). (Non-Professional Users must be external since a person
who uses the COB Data Feed for a commercial purpose cannot be a Non-
Professional User.)
\13\ A ``Non-Professional User'' is a natural person who uses
the COB Data Feed only for personal purposes and not for any
commercial purpose and who, if he or she works in the United States,
is not: (i) Registered or qualified in any capacity with the
Securities and Exchange Commission, the Commodities Futures Trading
Commission, any state securities agency, any securities exchange or
association, or any commodities or futures contract market or
association; (ii) engaged as an ``investment adviser'' as that term
is defined in Section 201(11) of the Investment Advisors Act of 1940
(whether or not registered or qualified under that Act); or (iii)
employed by a bank or other organization exempt from registration
under federal or state securities laws to perform functions that
would require registration or qualification if such functions were
performed for an organization not so exempt; or, if he or she works
outside of the United States, does not perform the same functions as
someone who would qualify as a Non-Professional User if he or she
worked in the United States.
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The Exchange proposes to reduce the Data Fee from $500 per month to
$100 per month. The Data Fee would be waived for Customers of the Book
Depth Data Feed. The Exchange proposes to reduce the User Fee for Non-
Professional Users from $1 per month to zero.\14\ For the purpose of
consistency, the Exchange proposes to amend the definition of a COB
Data Feed Customer so that it is the same definition that is applicable
to the BBO and Book Depth Data Feeds.
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\14\ The Exchange proposes to amend the definition of ``Non-
Professional User'' so that it is consistent with the definition of
``Non-Professional User'' used by OPRA. See OPRA Addendum for
Nonprofessionals, which is part of Attachments B-1 and B-2 to OPRA's
Vendor Agreement. A ``Non-Professional User'' would mean a natural
person or qualifying trust that uses Data only for personal purposes
and not for any commercial purpose and, for a natural person who
works in the United States, is not: (i) Registered or qualified in
any capacity with the Securities and Exchange Commission, the
Commodities Futures Trading Commission, any state securities agency,
any securities exchange or association, or any commodities or
futures contract market or association; (ii) engaged as an
``investment adviser'' as that term is defined in Section 201(11) of
the Investment Advisors Act of 1940 (whether or not registered or
qualified under that Act); or (iii) employed by a bank or other
organization exempt from registration under federal or state
securities laws to perform functions that would require registration
or qualification if such functions were performed for an
organization not so exempt; or, for a natural person who works
outside of the United States, does not perform the same functions as
would disqualify such person as a Non-Professional User if he or she
worked in the United States.
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Systems Fees: MDX currently charges a Port Fee of $500 per data
port per month for receipt of a data feed through a connection to MDX.
The Exchange proposes to amend the MDX Fee Schedule to clarify how the
Port Fee is assessed. First, the Exchange proposes to clarify that the
Port Fee applies to the receipt of any data feed through a connection
to MDX, not only for the receipt of the BBO Data Feed. Second, the
Exchange proposes to amend the description of the fee to clarify that
it is payable by any Customer that receives data through a direct
connection to MDX or through a connection to MDX provided by an
extranet service provider. Lastly, the Exchange proposes to clarify
that the port fee applies to receipt of any data feed but is only
assessed once per data port. For example, if a Customer receives two
data feeds over the same port, the Port Fee is only assessed once for
that port.
The Exchange also proposes to delete from the MDX Fee Schedule the
statements that MDX will not charge fees for any of the data feeds (or
the port fee) for any calendar month in which Customer commences
receipt of the data after the 15th day of the month (or in the case of
the port fee, establishes the connection after the 15th day of the
month) or discontinues receipt of the data before the 15th day of the
month (or in the case of the port fee, disconnects before the 15th day
of the month). The Exchange believes it would be more appropriate for
billing policies to be located within MDX's written agreement with
Customers.
All of the proposed fee changes would be effective on January 1,
2015.
2. Statutory Basis
The Exchange believes the proposed rule change is consistent with
the Securities Exchange Act of 1934 (the ``Act'') and the rules and
regulations thereunder applicable to the Exchange and, in particular,
the requirements of Section 6(b) of the Act.\15\ Specifically, the
Exchange believes the proposed rule change is consistent with Section
6(b)(4) of the Act,\16\ which requires that Exchange rules provide for
the equitable allocation of reasonable dues, fees, and other charges
among its Trading Permit Holders and other persons using its
facilities. The Exchange also believes the proposed rule change is
consistent with the Section 6(b)(5) \17\ requirement that the rules of
an exchange not be designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
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\15\ 15 U.S.C. 78f(b).
\16\ 15 U.S.C. 78f(b)(4).
\17\ Id.
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BBO Data Fees
The Exchange believes the proposed Display Only Service User Fee
for the BBO Data Feed is equitable and not unfairly discriminatory
because it would apply equally to all Customers that distribute data
via a Display Only Service. The Exchange believes the proposed User Fee
is reasonable because it compares favorably to usage fees that other
markets charge for similar products. For example, NASDAQ OMX PHLX
charges a $40 per month Professional Subscriber Fee for use of its
market data products by each of internal and external users. The
International Securities Exchange charges a $20 per month Controlled
Device Fee for use of its Top Quote Feed and a separate $25 per month
Controlled Device Fee for use of its Spread Feed. NYSE charges a $50
per month Professional User Fee for use of each of its NYSE ArcaBook
for Amex Options and NYSE ArcaBook for Arca Options market data
products that include top-of-book and last sale data similar to the
data in the BBO Data Feed.
The Exchange believes it is equitable and not unfairly
discriminatory to charge a lower fee for use of BBO data via a Display
Only Service because such use would be limited to display use only. The
Display Only Service would only allow a natural person end-user to view
and manipulate data using the Customer's computerized service, but not
to save, copy, export or transfer the data or any results of the
manipulation to any other computer hardware, software or media, except
for printing it to paper or other non-magnetic media. The Exchange
notes other exchanges charge fees for market data products based on
distinctions between ``display'' and ``non-display'' usage.\18\
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\18\ See e.g., Securities Exchange Act Release No. 69554 (May
10, 2013), 78 FR 28917 (May 16, 2013), (SR-NYSEArca-2013-47);
Securities Exchange Act Release No. 69553 (May 10, 2013), 78 FR
28926 (May 16, 2013), (SR-NYSEMKT-2013-40); Securities Exchange Act
Release No. 68576 (January 3, 2013), 78 FR 1886 (January 9, 2013),
(SR-PHLX-2012-145); and Securities Exchange Act Release No. 64652
(June 13, 2011), 76 FR 35498 (June 17, 2011), (SR-NASDAQ-2011-45).
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Book Depth Data Fees
The Exchange believes the proposed Data Fee for the Book Depth Data
Feed is equitable and not unfairly discriminatory because it would
apply equally to all Customers. All Customers would have the same
rights to utilize the data (i.e., use the data internally and/or
distribute it externally) as long as the Customer has entered into a
market data agreement with MDX for the data and pays the Data Fee.
The Exchange believes the proposed Data Fee is reasonable because
it compares favorably to fees that other markets charge for similar
products. For example, BATS BZX Exchange charges a $1,000 per month
Internal Use Access Fee and a $5,000 per month External Distribution
Access Fee for Multicast PITCH, which is its depth of market and last
sale feed. NASDAQ OMX PHLX charges Internal Distributors a monthly fee
of $4,000 and External Distributors a monthly fee of a $4,500 for its
Depth of Market data feed that includes full depth of quotes and orders
and last sale data for options listed on PHLX. NYSE charges a $3,000
per month Access Fee and $2,000 per month External Redistribution fee
for each of its NYSE ArcaBook for Amex Options and NYSE
[[Page 564]]
ArcaBook for Arca Options market data products that include top-of-
book, last sale and depth of quote data.
The Exchange believes the proposal to allow BBO Data Feed Customers
to upgrade to become Book Depth Data Feed Customers without any
additional Data Fee is equitable and not unfairly discriminatory
because it would apply equally to all BBO Data Feed Customers. BBO Data
Feed Customers currently pay MDX $1,000 per month for the right to use
and redistribute the data in the BBO Data Feed. The Book Depth Data
Feed includes all of the data in the BBO Data Feed. The proposed fee
arrangement would allow a Book Depth Data Feed Customer who has
upgraded from a BBO Data Feed to use and redistribute Book Depth data
for no additional charge, thereby incentivizing further redistribution
of the data in the Book Depth Data Feed. The Exchange notes other
exchanges offer similar fee arrangements.\19\
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\19\ For example, the Exchange believes the NASDAQ Options
Market charges only one distributor fee to allow a subscriber access
to its ``NASDAQ ITCH-to-Trade Options'' (ITTO) and ``Best of NASDAQ
Options'' (BONO) products. The Exchange believes NASDAQ OMX BX
charges only one distributor fee to allow a subscriber access to its
``BX Options Depth of Market'' (BX Depth) and ``BX Options Top of
Market'' (BX Top) products. In addition, the Exchange believes the
International Securities Exchange charges no additional fee to
subscribers of its ``Depth of Market'' Feed that also access its Top
Quote Feed.
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The Exchange believes the proposed Display Only Service User Fee
for the Book Depth Data Feed is equitable and not unfairly
discriminatory because it would apply equally to all Customers that
distribute data via a Display Only Service. The Exchange believes the
proposed User Fee is reasonable because it compares favorably to usage
fees that other markets charge for similar products. For example,
NASDAQ OMX PHLX charges a $40 per month Professional Subscriber Fee for
use of its market data products by each of internal and external users.
The International Securities Exchange charges a $50 per month
Controlled Device Fee for use of its Depth of Market Feed. NYSE charges
a $50 per month Professional User Fee for use of each of its NYSE
ArcaBook for Amex Options and NYSE ArcaBook for Arca Options market
data products.
The Exchange believes it is equitable and not unfairly
discriminatory to charge a lower fee for use of Book Depth data via a
Display Only Service because such use would be limited to display use
only. The Display Only Service would only allow a natural person end-
user to view and manipulate data using the Customer's computerized
service, but not to save, copy, export or transfer the data or any
results of the manipulation to any other computer hardware, software or
media, except for printing it to paper or other non-magnetic media. As
noted above, other exchanges charge fees for market data products based
on distinctions between ``display'' and ``non-display'' usage.\20\
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\20\ Supra footnote 18.
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COB Data Fees: The Exchange believes the proposed reductions of the
Data Fee and Non-professional User Fee for the COB Data Feed are
equitable and not unfairly discriminatory because they would apply
equally to all Customers of the COB Data Feed. The Exchange believes
the proposed Data Fee is reasonable because it compares favorably to
fees that other markets charge for similar products. For example, as
noted above, the International Securities Exchange charges distributors
of its Spread Feed a base monthly fee of $3,000. The proposed lower
Data Fee may permit wider distribution of the COB Data Feed at a lower
cost to Customers, and the reduced User Fee may make it less costly for
Customers to distribute data to Non-professional Users, thereby
benefitting both Customers and Non-professional Users, including public
investors.
The Exchange believes the proposal to allow Book Depth Data Feed
Customers to become COB Data Feed Customers without any additional Data
Fee is equitable and not unfairly discriminatory because it would apply
equally to all Book Depth Data Feed Customers. Book Depth Data Feed
Customers would pay MDX $1,000 per month for the right to use and
redistribute the data in the Book Depth Data Feed. The COB Data Feed is
a subset of the Book Depth Data Feed. The proposed fee arrangement
would allow a Book Depth Data Feed Customer to use and redistribute the
COB Data Feed for no additional charge, thereby incentivizing further
redistribution of the data in the COB Data Feed. The Exchange notes
other exchanges offer similar fee arrangements.\21\
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\21\ Supra footnote 19.
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Systems Fees and Billing Policy: The Exchange believes the proposed
changes to the description of the Port Fee are equitable, reasonable
and not unfairly discriminatory because they would benefit all
Customers by clarifying how the Port Fee is assessed. The Exchange
believes removing the billing policy from the MDX Fee Schedule is
equitable, reasonable and not unfairly discriminatory because MDX
believes it would be more appropriate for billing policies to be
located within MDX's written agreement with Customers along with other
policies related to MDX's market data services.
For the reasons cited above, the Exchange believes the proposed
fees for the BBO, Book Depth and COB Data Feeds are equitable,
reasonable and not unfairly discriminatory. In addition, the Exchange
believes that no substantial countervailing basis exists to support a
finding that the proposed fees for the BBO, Book Depth and COB Data
Feeds fail to meet the requirements of the Act.
B. Self-Regulatory Organization's Statement on Burden on Competition
C2 does not believe that the proposed rule change will impose any
burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.
An exchange's ability to price its proprietary data feed products
is constrained by (1) the existence of actual competition for the sale
of such data, (2) the joint product nature of exchange platforms, and
(3) the existence of alternatives to proprietary data.
The Existence of Actual Competition. The Exchange believes
competition provides an effective constraint on the market data fees
that the Exchange, through MDX, has the ability and the incentive to
charge. C2 has a compelling need to attract order flow from market
participants in order to maintain its share of trading volume. This
compelling need to attract order flow imposes significant pressure on
C2 to act reasonably in setting its fees for market data, particularly
given that the market participants that will pay such fees often will
be the same market participants from whom C2 must attract order flow.
These market participants include broker-dealers that control the
handling of a large volume of customer and proprietary order flow.
Given the portability of order flow from one exchange to another, any
exchange that sought to charge unreasonably high data fees would risk
alienating many of the same customers on whose orders it depends for
competitive survival. C2 currently competes with eleven options
exchanges (including C2's affiliate, Chicago Board Options Exchange)
for order flow.\22\
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\22\ The Commission has previously made a finding that the
options industry is subject to significant competitive forces. See
e.g., Securities Exchange Act Release No. 59949 (May 20, 2009), 74
FR 25593 (May 28, 2009) (SR-ISE-2009-97) (order approving ISE's
proposal to establish fees for a real-time depth of market data
offering).
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In addition, in the case of products that are distributed through
market data vendors, the market data vendors
[[Page 565]]
themselves provide additional price discipline for proprietary data
products because they control the primary means of access to certain
end users. These vendors impose price discipline based upon their
business models. For example, vendors that assess a surcharge on data
they sell are able to refuse to offer proprietary products that their
end users do not or will not purchase in sufficient numbers. Internet
portals, such as Google, impose price discipline by providing only data
that they believe will enable them to attract ``eyeballs'' that
contribute to their advertising revenue. Similarly, Customers will not
offer the BBO, Book Depth or COB Data Feeds unless these products will
help them maintain current users or attract new ones. For example, a
broker-dealer will not choose to offer the BBO, Book Depth or COB Data
Feeds to its retail customers unless the broker-dealer believes that
the retail customers will use and value the data and the provision of
such data will help the broker-dealer maintain the customer
relationship, which allows the broker-dealer to generate profits for
itself. Professional users will not request any of these feeds from
Customers unless they can use the data for profit-generating purposes
in their businesses. All of these operate as constraints on pricing
proprietary data products.
Joint Product Nature of Exchange Platform. Transaction execution
and proprietary data products are complementary in that market data is
both an input and a byproduct of the execution service. In fact, market
data and trade executions are a paradigmatic example of joint products
with joint costs. The decision whether and on which platform to post an
order will depend on the attributes of the platforms where the order
can be posted, including the execution fees, data quality, and price
and distribution of their data products. The more trade executions a
platform does, the more valuable its market data products become. The
costs of producing market data include not only the costs of the data
distribution infrastructure, but also the costs of designing,
maintaining, and operating the exchange's transaction execution
platform and the cost of regulating the exchange to ensure its fair
operation and maintain investor confidence. The total return that a
trading platform earns reflects the revenues it receives from both
products and the joint costs it incurs. Moreover, an exchange's broker-
dealer customers view the costs of transaction executions and market
data as a unified cost of doing business with the exchange.
Analyzing the cost of market data product production and
distribution in isolation from the cost of all of the inputs supporting
the creation of market data and market data products will inevitably
underestimate the cost of the data and data products. Thus, because it
is impossible to obtain the data inputs to create market data products
without a fast, technologically robust, and well-regulated execution
system, system costs and regulatory costs affect the price of both
obtaining the market data itself and creating and distributing market
data products. It would be equally misleading, however, to attribute
all of an exchange's costs to the market data portion of an exchange's
joint products. Rather, all of an exchange's costs are incurred for the
unified purposes of attracting order flow, executing and/or routing
orders, and generating and selling data about market activity. The
total return that an exchange earns reflects the revenues it receives
from the joint products and the total costs of the joint products.
The level of competition and contestability in the market is
evident in the numerous alternative venues that compete for order flow,
including 12 options self-regulatory organization (``SRO'') markets, as
well as internalizing broker-dealers (``BDs'') and various forms of
alternative trading systems (``ATSs''), including dark pools and
electronic communication networks (``ECNs''). Competition among trading
platforms can be expected to constrain the aggregate return that each
platform earns from the sale of its joint products, but different
platforms may choose from a range of possible, and equally reasonable,
pricing strategies as the means of recovering total costs. For example,
some platforms may choose to pay rebates to attract orders, charge
relatively low prices for market data products (or provide market data
products free of charge), and charge relatively high prices for
accessing posted liquidity. Other platforms may choose a strategy of
paying lower rebates (or no rebates) to attract orders, setting
relatively high prices for market data products, and setting relatively
low prices for accessing posted liquidity. In this environment, there
is no economic basis for regulating maximum prices for one of the joint
products in an industry in which suppliers face competitive constraints
with regard to the joint offering.
The Existence of Alternatives. C2 is constrained in pricing the
BBO, Book Depth and COB Data Feeds by the availability to market
participants of alternatives to purchasing these products. C2 must
consider the extent to which market participants would choose one or
more alternatives instead of purchasing the exchange's data. Other
options exchanges can and have produced their own top-of-book, book
depth and complex strategies market data products, and thus are sources
of potential competition for MDX. For example, as noted above, BATS,
ISE, NASDAQ OMX PHLX and NYSE offer market data products that compete
with the BBO, Book Depth and COB Data Feeds. The large number of SROs,
BDs, and ATSs that currently produce proprietary data or are currently
capable of producing it provides further pricing discipline for
proprietary data products. Each SRO, ATS, and BD is currently permitted
to produce proprietary data products, and many currently do. In
addition, the OPRA data feed is a significant competitive alternative
to the BBO and last sale data included in the BBO and Book Depth Data
Feeds.
Further, data products are valuable to professional users only if
they can be used for profit-generating purposes in their businesses and
valuable to non-professional users only insofar as they provide
information that such users expect will assist them in tracking prices
and market trends and making trading decisions.
The existence of numerous alternatives to the Exchange's products,
including proprietary data from other sources, ensures that the
Exchange cannot set unreasonable fees, or fees that are unreasonably
discriminatory, when vendors and subscribers can elect these
alternatives or choose not to purchase a specific proprietary data
product if its cost to purchase is not justified by the returns any
particular vendor or subscriber would achieve through the purchase.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \23\ and paragraph (f) of Rule 19b-4 \24\
thereunder. At any time within 60 days of the filing of the proposed
rule change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such
[[Page 566]]
action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the purposes of
the Act. If the Commission takes such action, the Commission will
institute proceedings to determine whether the proposed rule change
should be approved or disapproved.
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\23\ 15 U.S.C. 78s(b)(3)(A).
\24\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-C2-2014-029 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 SR-C2-2014-029. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549 on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-C2-2014-029 and should be
submitted on or before January 27, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\25\
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\25\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2014-30890 Filed 1-5-15; 8:45 am]
BILLING CODE 8011-01-P
