Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for a Market Data Product Known as EDGA Book Viewer, 53370-53375 [2015-21872]
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Federal Register / Vol. 80, No. 171 / Thursday, September 3, 2015 / Notices
the securities trading activities set forth
in NASD Rule 1032(f)(1) is required to
qualify and register as an Equity Trader.
FINRA rules do not expressly require
such person to register in a specific
principal registration category. On the
other hand, most national securities
exchanges expressly require that an
individual associated with an exchange
member who has supervisory
responsibility over proprietary trading
activities qualify and register as a
Proprietary Trader Principal.
In its proposal, FINRA amends NASD
Rule 1022(a) to require each person
associated with a FINRA member who
is included within the definition of
‘‘principal’’ in NASD Rule 1021 and
who has supervisory responsibility over
the securities trading activities
described in NASD Rule 1032(f)(1) to
qualify and register as a Securities
Trader Principal. To qualify for
registration as a Securities Trader
Principal, a person must first qualify
and register as a Securities Trader and
then pass the General Securities
Principal qualification examination
(Series 24).10 As proposed, a person
who is qualified and registered only as
a Securities Trader Principal may only
have supervisory responsibility over the
activities specified in NASD Rule
1032(f)(1). Moreover, a person who is
registered as a General Securities
Principal will not be qualified to
supervise the trading activities
described in NASD Rule 1032(f)(1),
unless the person qualifies and registers
as a Securities Trader by passing the
Series 57 examination and affirmatively
registers as a Securities Trader
Principal.
As proposed, a person registered as a
General Securities Principal and an
Equity Trader in the CRD system on the
effective date of the proposed rule
change will be eligible to register as a
Securities Trader Principal without
having to take any additional
examinations.11 FINRA members,
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10 The
exchanges have indicated that they plan to
replace the Series 56 examination with the Series
57 examination under their respective registration
rules, thus the Series 57 examination will also
replace the Series 56 examination for those
registration categories, such as the Proprietary
Trader Principal registration category, where the
Series 56 examination is currently an acceptable
prerequisite.
11 An individual who was registered as a General
Securities Principal and an Equity Trader in the
CRD system before the effective date of the
proposed rule change will also be eligible to register
as a Securities Trader Principal without having to
take any additional examinations, provided that no
more than two years has passed between the date
that person was last registered as a principal and
the date that person registers as a Securities Trader
Principal. Moreover, on the effective date of the
proposed rule change, FINRA will convert
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however, will be required to
affirmatively register persons who
transition to Securities Trader
Principals on or after the effective date
of the proposed rule change.12
III. Comment Letters
The Commission received two
comment letters that support the
proposed rule change.13 These
commenters note that the proposal
would eliminate or reduce redundancies
and inefficiencies that exist in the
current qualification regime.14 These
commenters also support the timeline
for implementing the proposed rule
change.15
IV. Discussion and Commission
Findings
After careful review of the proposed
rule change and the comment letters,
the Commission finds that the proposed
rule change is consistent with the
requirements of the Act and the rules
and regulations thereunder that are
applicable to a national securities
association.16 Specifically, the
Commission finds that the proposed
rule change is consistent with Section
15A(b)(6) of the Act,17 which requires,
among other things, that FINRA rules be
designed to prevent fraudulent and
Proprietary Trader Principal registrations in the
CRD system into Securities Trader Principal
registrations.
12 In connection with the proposals discussed
above, and in anticipation of the national securities
exchanges filing similar proposed rule changes to
replace the Series 56 examination with the Series
57 examination in their respective registration
rules, FINRA proposes to amend the Form U4 to
replace: (1) the Equity Trader registration category
with the Securities Trader registration category as
well as references to the Series 55 examination with
the Series 57 examination; (2) references to the
Series 56 examination with the Series 57
examination; and (3) the Proprietary Trader
Principal registration category with the Securities
Trader Principal registration category.
13 See supra note 4.
14 See SIFMA Letter at 3–4 and ARM Letter at 2.
15 See SIFMA Letter at 4 and ARM Letter at 2.
However, one commenter requests that FINRA
provide some flexibility in the timeline given the
other initiatives that member firms are currently
undertaking or will undertake in the near future.
See SIFMA Letter at 4. See also ARM Letter at 2.
This commenter also encourages FINRA to
coordinate the current proposal and the
Algorithmic Trading proposal that was set forth in
FINRA Regulatory Notice 15–06, and to implement
the Series 57 regime before implementing the
Algorithmic Trading proposal (assuming the
Algorithmic Trading proposal moves forward). See
SIFMA Letter at 5. Moreover, this commenter
encourages FINRA to solicit comment on the Series
57 examination content through a Regulatory
Notice. See id. The Commission notes that FINRA
will file a proposed rule change to implement the
new exam. See Notice, supra note 3, at n. 6.
16 In approving this proposed rule change, the
Commission has considered the proposed rule’s
impact on efficiency, competition, and capital
formation. See 15 U.S.C. 78c(f).
17 15 U.S.C. 78o–3(b)(6).
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manipulative acts and practices, to
promote just and equitable principles of
trade, and, in general, to protect
investors and the public interest. The
Commission also finds that the
proposed rule change is consistent with
Section 15A(g)(3) of the Act,18 which
requires FINRA to prescribe standards
of training, experience, and competence
for persons associated with FINRA
members. The proposed rule change
should harmonize the qualification and
registration requirements for individuals
engaged in securities trading activities
across different markets and for
principals responsible for supervising
such activities. In addition, by explicitly
requiring the registration of Securities
Trader Principals, as such, the proposal
will help FINRA to identify and contact
principals with supervisory
responsibility over the securities trading
activities described in NASD Rule
1032(f)(1).
V. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Act,19 that the
proposed rule change (SR–FINRA–
2015–017) be, and hereby is,approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–21869 Filed 9–2–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–75787; File No. SR–EDGA–
2015–34]
Self-Regulatory Organizations; EDGA
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change Related to Fees for a
Market Data Product Known as EDGA
Book Viewer
August 28, 2015.
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 August
24, 2015, EDGA Exchange, Inc. (the
‘‘Exchange’’ or ‘‘EDGA’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II and III
below, which Items have been prepared
by the Exchange. The Exchange has
18 15
U.S.C. 78o–3(g)(3).
U.S.C. 78s(b)(2).
20 17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
19 15
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Federal Register / Vol. 80, No. 171 / Thursday, September 3, 2015 / Notices
designated the proposed rule change as
one establishing or changing a member
due, fee, or other charge imposed by the
Exchange under Section 19(b)(3)(A)(ii)
of the Act 3 and Rule 19b–4(f)(2)
thereunder,4 which renders the
proposed rule change effective upon
filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange filed a proposal to
amend the Market Data section of its fee
schedule to adopt fees for a market data
product called EDGA Book Viewer.
The text of the proposed rule change
is available at the Exchange’s Web site
at www.batstrading.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
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 parts of such
statements.
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(A) Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Market Data section of its fee schedule
to adopt fees for market data product
called EDGA Book Viewer. EDGA Book
Viewer is a data feed that disseminates,
on a real-time basis, the aggregated twoside quotations for up to five (5) price
levels for all displayed orders for
securities traded on the Exchange and
for which the Exchanges reports quotes
under the Consolidated Tape
Association (‘‘CTA’’) Plan or the
Nasdaq/UTP Plan. EDGA Book Viewer
also contains the last ten (10) trades
including time of trade, price and share
quantity.5 EDGA Book Viewer is
3 15
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
5 See Securities Exchange Act Release No. 75712
(August 17, 2015), 80 FR 50881 (August 21, 2015)
4 17
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currently available via
www.batstrading.com without charge.
The Exchange now proposes to amend
its fee schedule to incorporate fees for
distribution of EDGA Book Viewer to
subscribers.6 EDGA Book Viewer will
remain available via
www.batstrading.com for viewing
without charge. The proposed fees
include the following, each of which are
described in detail below: (i)
Distribution Fees for both Internal and
External Distributors; 7 (ii) Usage Fees
for both Professional 8 and NonProfessional 9 Users; 10 (iii) an Enterprise
(SR–EDGA–2015–31) (Notice of Filing and
Immediate Effectiveness of a Proposed Rule Change
to Amend Rule 13.8 to Describe the Market Data
Product EDGA Book Viewer).
6 The Exchange notes that its affiliated exchanges,
EDGX Exchange, Inc. (‘‘EDGX’’), BATS Y–
Exchange, Inc. (‘‘BYX’’) and BATS Exchange, Inc.
(‘‘BZX’’, together with the Exchange, EDGX and
BYX, the ‘‘BATS Exchanges’’), also intent to file
proposed rule changes with Commission to adopt
similar fees for their respective Book Viewer market
data product.
7 A ‘‘Distributor’’ is defined as ‘‘any entity that
receives the Exchange Market Data product directly
from the Exchange or indirectly through another
entity and then distributes it internally or externally
to a third party.’’ See the Exchange Fee Schedule
available at https://batstrading.com/support/
fee_schedule/edga/. An ‘‘Internal Distributor’’ is
defined as ‘‘a Distributor that receives the Exchange
Market Data product and then distributes that data
to one or more Users within the Distributor’s own
entity.’’ Id. An ‘‘External Distributor’’ is defined as
‘‘a Distributor that receives the Exchange Market
Data product and then distributes that data to a
third party or one or more Users outside the
Distributor’s own entity.’’ Id.
8 A ‘‘Professional User’’ is defined as ‘‘any User
other than a Non-Professional User.’’ See the
Exchange Fee Schedule available at https://
batstrading.com/support/fee_schedule/edga/.
9 A ‘‘Non-Professional User’’ is defined as ‘‘a
natural person who is not: (i) Registered or qualified
in any capacity with the Commission, the
Commodity Futures Trading Commission, any state
securities agency, any securities exchange or
association, or any commodities or futures contract
market or association; (ii) engaged as an
‘‘investment adviser’’ as that term is defined in
Section [202(a)(11)] of the Investment Advisers Act
of 1940 (whether or not registered or qualified
under that Act); or (iii) employed by a bank or other
organization exempt from registration under federal
or state securities laws to perform functions that
would require registration or qualification if such
functions were performed for an organization not so
exempt.’’ Id.
10 The Exchange notes that User fees as well as
the distinctions based on professional and nonprofessional users have been previously filed with
or approved by the Commission by the BATS
Exchanges and the Nasdaq Stock Market LLC
(‘‘Nasdaq’’). See Securities Exchange Act Release
No. 59582 (March 16, 2009), 74 FR 12423 (March
24, 2009) (Order approving SR–Nasdaq–2008–102).
See also See Securities Exchange Act Release Nos.
74285 (February 18, 2015), 80 FR 9828 (February
24, 2015) (SR–BATS–2015–11); 74283 (February 18,
2015), 80 FR 9809 (February 24, 2015) (SR–EDGA–
2015–09); 74282 (February 17, 2015), 80 FR 9487
(February 23, 2015) (SR–EDGX–2015–09); and
74284 (February 18, 2015), 80 FR 9792 (February
24, 2015) (SR–BYX–2015–09) (‘‘Initial BATS One
Feed Fee Filings’’).
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53371
Fee; 11 and (iv) a Digital Media
Enterprise Fee.
Distribution Fees. As proposed, each
Internal Distributor that receives EDGA
Book Viewer shall pay a fee of $500 per
month. The Exchange does not propose
to charge any User fees for EDGA Book
Viewer where the data is received and
subsequently internally distributed to
Professional or Non-Professional Users.
In addition, the Exchange proposes to
charge External Distributors that
receives EDGA Book Viewer a fee of
$2,500 per month.
User Fees. The Exchange proposes to
charge those who receive EDGA Book
Viewer from External Distributors
different fees for both their Professional
Users and Non-Professional Users. The
Exchange will assess a monthly fee for
Professional Users of $3.00 per User.
Non-Professional Users will be assessed
a monthly fee of $0.10 per User. The
Exchange does not propose to charge
per User fees to Internal Distributors.
External Distributors that receives
EDGA Book Viewer would be required
to count every Professional User and
Non-Professional User to which they
provide EDGA Book Viewer, the
requirements for which are identical to
that currently in place for the BATS One
Feed.12 Thus, the External Distributor’s
count will include every person and
device that accesses the data regardless
of the purpose for which the individual
or device uses the data. External
Distributors must report all Professional
and Non-Professional Users in
accordance with the following:
• In connection with an External
Distributor’s distribution of EDGA Book
Viewer, the Distributor should count as
one User each unique User that the
Distributor has entitled to have access to
EDGA Book Viewer. However, where a
device is dedicated specifically to a
single individual, the Distributor should
count only the individual and need not
count the device.
• The External Distributor should
identify and report each unique User. If
a User uses the same unique method to
gain access to EDGA Book Viewer, the
Distributor should count that as one
User. However, if a unique User uses
multiple methods to gain access to
11 The Exchange notes that Enterprise fees have
been previously filed with or approved by the
Commission by the Exchange, EDGA, BYX, BZX,
Nasdaq, NYSE, and the CTA/CQ Plans. See Nasdaq
Rule 7047. Securities Exchange Act Release Nos.
71507 (February 7, 2014), 79 FR 8763 (February 13,
2014) (SR–NASDAQ–2014–011); 70211 (August 15,
2013), 78 FR 51781 (August 21, 2013) (SR–NYSE–
2013–58); and 70010 (July 19, 2013) (File No. SR–
CTA/CQ–2013–04). See also the Initial BATS One
Feed Fee Filings, supra note 10.
12 See the Initial BATS One Feed Fee Filings,
supra note 10.
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EDGA Book Viewer (e.g., a single User
has multiple passwords and user
identifications), the External Distributor
should report all of those methods as an
individual User.
• External Distributors should report
each unique individual person who
receives access through multiple
devices as one User so long as each
device is dedicated specifically to that
individual.
• If an External Distributor entitles
one or more individuals to use the same
device, the External Distributor should
include only the individuals, and not
the device, in the count.
Each External Distributor will receive
a credit against its monthly Distributor
Fee for EDGA Book Viewer equal to the
amount of its monthly Usage Fees up to
a maximum of the Distributor Fee for
EDGA Book Viewer. For example, an
External Distributor will be subject to a
$2,500 monthly Distributor Fee where
they receive EDGA Book Viewer. If that
External Distributor reports User
quantities totaling $2,500 or more of
monthly usage of EDGA Book Viewer, it
will pay no net Distributor Fee, whereas
if that same External Distributor were to
report User quantities totaling $1,000 of
monthly usage, it will pay a net of
$1,500 for the Distributor Fee. External
Distributors will remain subject to the
per User fees discussed above.
Enterprise Fee. The Exchange also
proposes to establish a $20,000 per
month Enterprise Fee that will permit a
recipient firm who receives EDGA Book
Viewer from an External Distributor to
receive the data for an unlimited
number of Professional and NonProfessional Users. For example, if a
recipient firm had 15,000 Professional
Users who each receive EDGA Book
Viewer at $3.00 per month, then that
recipient firm will pay $45,000 per
month in Professional Users fees. Under
the proposed Enterprise Fee, the
recipient firm will pay a flat fee of
$20,000 for an unlimited number of
Professional and Non-Professional Users
for EDGA Book Viewer. A recipient firm
must pay a separate Enterprise Fee for
each External Distributor that controls
the display of EDGA Book Viewer if it
wishes such User to be covered by an
Enterprise Fee rather than by per User
fees. A recipient firm that pays the
Enterprise Fee will not have to report its
number of such Users on a monthly
basis. However, every six months, a
recipient firm must provide the
Exchange with a count of the total
number of natural person users of each
product, including both Professional
and Non-Professional Users. Lastly, the
proposed Enterprise Fee would be
counted towards the Distributor Fee
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credit described above, under which an
External Distributor receives a credit
towards its Distributor Fee equal to the
amount of its monthly EDGA Book
Viewer User fees.
Digital Media Enterprise Fee. The
Exchange proposes to adopt a Digital
Media Enterprise Fee of $5,000 per
month for EDGA Book Viewer. As an
alternative to proposed User fees
discussed above, a recipient firm may
purchase a monthly Digital Media
Enterprise license to receive EDGA Book
Viewer from an External Distributor to
distribute to an unlimited number of
Professional and Non-Professional Users
for viewing via television, Web sites,
and mobile devices for informational
and non-trading purposes only without
having to account for the extent of
access to the data or the report the
number of Users to the Exchange.
Lastly, the proposed Digital Media
Enterprise Fee would be counted
towards the Distributor Fee credit
described above, under which an
External Distributor receives a credit
towards its Distributor Fee equal to the
amount of its monthly EDGA Book
Viewer User fees.
Implementation Date
The Exchange proposes to implement
the proposed changes to its fee schedule
on September 8, 2015.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,13
in general, and furthers the objectives of
Section 6(b)(4),14 in particular, as it is
designed to provide for the equitable
allocation of reasonable dues, fees and
other charges among its members and
other recipients of Exchange data. The
Exchange believes that the proposed
rates are equitable and nondiscriminatory in that they apply
uniformly to all recipients of Exchange
data. The Exchange believes the
proposed fees are competitive with
those charged by other venues and,
therefore, reasonable and equitably
allocated to recipients. Lastly, the
Exchange also believes that the
proposed fees are reasonable and nondiscriminatory because they will apply
uniformly to all recipients of Exchange
data.
The Exchange also believes that the
proposed rule change is consistent with
Section 11(A) of the Act 15 in that it
supports (i) fair competition among
brokers and dealers, among exchange
13 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
15 15 U.S.C. 78k–1.
markets, and between exchange markets
and markets other than exchange
markets and (ii) the availability to
brokers, dealers, and investors of
information with respect to quotations
for and transactions in securities.
Furthermore, the proposed rule change
is consistent with Rule 603 of
Regulation NMS,16 which provides that
any national securities exchange that
distributes information with respect to
quotations for or transactions in an NMS
stock do so on terms that are not
unreasonably discriminatory. In
adopting Regulation NMS, the
Commission granted self-regulatory
organizations and broker-dealers
increased authority and flexibility to
offer new and unique market data to the
public. It was believed that this
authority would expand the amount of
data available to consumers, and also
spur innovation and competition for the
provision of market data.
In addition, the proposed fees would
not permit unfair discrimination
because all of the Exchange’s customers
and market data vendors will be subject
to the proposed fees on an equivalent
basis. EDGA Book Viewer is distributed
and purchased on a voluntary basis, in
that neither the Exchange nor market
data distributors are required by any
rule or regulation to make this data
available. Accordingly, Distributors and
Users can discontinue use at any time
and for any reason, including due to an
assessment of the reasonableness of fees
charged. Firms have a wide variety of
alternative market data products from
which to choose, such as similar
proprietary data products offered by
other exchanges and consolidated data.
Moreover, the Exchange is not required
to make any proprietary data products
available or to offer any specific pricing
alternatives to any customers.
In addition, the fees that are the
subject of this rule filing are constrained
by competition. As explained below in
the Exchange’s Statement on Burden on
Competition, the existence of
alternatives to EDGA Book Viewer
further ensures that the Exchange
cannot set unreasonable fees, or fees
that are unreasonably discriminatory,
when vendors and subscribers can elect
such alternatives. That is, the Exchange
competes with other exchanges (and
their affiliates) that provide similar
market data products. If another
exchange (or its affiliate) were to charge
less to distribute its similar product
than the Exchange charges to
consolidate and distribute EDGA Book
Viewer, prospective Users likely would
14 15
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16 See
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17 CFR 242.603.
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not subscribe to, or would cease
subscribing to, EDGA Book Viewer.
The Exchange notes that the
Commission is not required to
undertake a cost-of-service or ratemaking approach. The Exchange
believes that, even if it were possible as
a matter of economic theory, cost-based
pricing for non-core market data would
be so complicated that it could not be
done practically.17
Distributor Fee. The Exchange
believes that the proposed Distributor
Fees are also reasonable, equitably
allocated, and not unreasonably
discriminatory. The fees for Members
and non-Members are uniform except
with respect to reasonable distinctions
with respect to internal and external
distribution.18 The Exchange believes
that the Distributor Fees for EDGA Book
Viewer are reasonable and fair in light
of alternatives offered by other market
centers. For example, EDGA Book
Viewer provides investors with
alternative market data and competes
17 The Exchange believes that cost-based pricing
would be impractical because it would create
enormous administrative burdens for all parties,
including the Commission, to cost-regulate a large
number of participants and standardize and analyze
extraordinary amounts of information, accounts,
and reports. In addition, it is impossible to regulate
market data prices in isolation from prices charged
by markets for other services that are joint products.
Cost-based rate regulation would also lead to
litigation and may distort incentives, including
those to minimize costs and to innovate, leading to
further waste. Under cost-based pricing, the
Commission would be burdened with determining
a fair rate of return, and the industry could
experience frequent rate increases based on
escalating expense levels. Even in industries
historically subject to utility regulation, cost-based
ratemaking has been discredited. As such, the
Exchange believes that cost-based ratemaking
would be inappropriate for proprietary market data
and inconsistent with Congress’s direction that the
Commission use its authority to foster the
development of the national market system, and
that market forces will continue to provide
appropriate pricing discipline. See Appendix C to
NYSE’s comments to the Commission’s 2000
Concept Release on the Regulation of Market
Information Fees and Revenues, which can be
found on the Commission’s Web site at https://
www.sec.gov/rules/concept/s72899/buck1.htm. See
also Securities Exchange Act Release No. 73816
(December 11, 2014), 79 FR 75200 (December 17,
2014) (SR–NYSE–2014–64) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
to Establish an Access Fee for the NYSE Best Quote
and Trades Data Feed, Operative December 1,
2014).
18 The Exchange notes that distinctions based on
external versus internal distribution have been
previously filed with the Commission by Nasdaq,
Nasdaq OMX BX, and Nasdaq OMX PSX. See
Nasdaq Rule 019(b); see also Securities Exchange
Act Release No. 62876 (September 9, 2010), 75 FR
56624 (September 16, 2010) (SR–PHLX–2010–120);
Securities Exchange Act Release No. 62907
(September 14, 2010), 75 FR 57314 (September 20,
2010) (SR–NASDAQ–2010–110); Securities
Exchange Act Release No. 63442 (December 6,
2010), 75 FR 77029 (December 10, 2010) (SR–BX–
2010–081). See also the Initial BATS One Feed Fee
Filings, supra note 10.
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with similar market data product
currently offered by the New York Stock
Exchange, Inc. (‘‘NYSE’’) and the
Nasdaq Stock Market LLC (‘‘Nasdaq’’).19
Specifically, the NYSE charges an
access fee of $5,000 per month for NYSE
OpenBook,20 which is higher than the
External Distributor fee proposed herein
for EDGA Book Viewer.
User Fees. The Exchange believes that
implementing the Professional and NonProfessional User fees for EDGA Book
Viewer are equitable and reasonable
because they will result in greater
availability to Professional and NonProfessional Users. Moreover,
introducing a modest Non-Professional
User fee for EDGA Book Viewer is
reasonable because it provides an
additional method for retail investors to
access EDGA Book Viewer data by
providing the same data that is available
to Professional Users. The Exchange
believes that the proposed fees are
equitable and not unfairly
discriminatory because they will be
charged uniformly to recipient firms
and Users. The fee structure of
differentiated Professional and NonProfessional fees is utilized by the
Exchange for the BATS One Feed and
has long been used by other exchanges
for their proprietary data products, and
by the Nasdaq UTP and the CTA and CQ
Plans in order to reduce the price of
data to retail investors and make it more
broadly available.21 Offering EDGA
Book Viewer to Non-Professional Users
with the same data available to
Professional Users results in greater
equity among data recipients.
In addition, the proposed fees are
reasonable when compared to similar
fees for comparable products offered by
the NYSE and Nasdaq. Specifically,
NYSE offers NYSE OpenBook for a
monthly fee of $60.00 per professional
subscriber and $15 per non-professional
19 See Nasdaq Rule 7023(a)(1)(C) (describing
Nasdaq TotalView is a depth-of-book data feed that
includes all orders and quotes from all Nasdaq
members displayed in the Nasdaq Market Center as
well as the aggregate size of such orders and quotes
at each price level in the execution functionality of
the Nasdaq Market Center). See also Nasdaq Book
Viewer, a description of which is available at
https://data.nasdaq.com/Book Viewer.aspx (last
visited July 29, 2015). See NYSE OpenBook
available at https://www.nyxdata.com/openbook
(last visited July 29, 2015) (providing real-time view
of the NYSE limit order book).
20 See NYSE Market Data Pricing dated May 2015
available at https://www.nyxdata.com/. Nasdaq
charges distribution fees ranging from $300 for 1–
10 subscribers to $75,000 for more than $250 [sic]
subscribers. See Nasdaq Rule 7023(b)(4).
21 See the Initial BATS One Feed Fee Filings,
supra note 10. See also, e.g., Securities Exchange
Act Release No. 20002, File No. S7–433 (July 22,
1983) (establishing nonprofessional fees for CTA
data); Nasdaq Rules 7023(b), 7047.
PO 00000
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53373
subscriber.22 Nasdaq offers Nasdaq
BookViewer for the same fees as Nasdaq
TotalView, which is a monthly fee of
$70.00 per professional subscriber and
$14 per non-professional subscriber.23
The Exchange’s proposed per User Fees
for EDGA Book Viewer are less than the
NYSE and Nasdaq fees.
Enterprise Fee. The proposed
Enterprise Fee for EDGA Book Viewer is
equitable and reasonable as the fees
proposed are less than the enterprise
fees currently charged for Nasdaq Book
Viewer, which is subject to the exact
same fees as Nasdaq TotalView. Nasdaq
charges an enterprise fee of $100,000
per month for Nasdaq TotalView,24
which is far greater than the proposed
Enterprise Fee of $20,000 per month for
EDGA Book Viewer. In addition, the
Enterprise Fee proposed by the
Exchange could result in a fee reduction
for recipient firms with a large number
of Professional and Non-Professional
Users. If a recipient firm has a smaller
number of Professional Users of EDGA
Book Viewer, then it may continue
using the per User structure and benefit
from the per User Fee reductions. By
reducing prices for recipient firms with
a large number of Professional and NonProfessional Users, the Exchange
believes that more firms may choose to
receive and to distribute EDGA Book
Viewer, thereby expanding the
distribution of this market data for the
benefit of investors.
The Exchange further believes that the
proposed Enterprise Fee is reasonable
because it will simplify reporting for
certain recipients that have large
numbers of Professional and NonProfessional Users. Firms that pay the
proposed Enterprise Fee will not have to
report the number of Users on a
monthly basis as they currently do, but
rather will only have to count natural
person users every six months, which is
a significant reduction in administrative
burden. Finally, the Exchange believes
that it is equitable and not unfairly
discriminatory to establish an Enterprise
Fee because it reduces the Exchange’s
costs and the Distributor’s
administrative burdens in tracking and
auditing large numbers of Users.
22 See NYSE Market Data Pricing dated May 2015
available at https://www.nyxdata.com/.
23 See Nasdaq Rule 7023(b)(2).
24 See Nasdaq Rule 7023(c)(2) (stating that a
distributor that is also a broker-dealer pays a
monthly fee of $100,000 for the right to provide
Nasdaq TotalView and for display usage for internal
distribution, or for external distribution to both
professional and non-professional subscribers with
whom the firm has a brokerage relationship.)
Nasdaq also charges an enterprise fee of $25,000 to
provide Nasdaq TotalView to an unlimited number
of non-professional subscribers only. See Nasdaq
Rule 7023(c)(1).
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tkelley on DSK3SPTVN1PROD with NOTICES
53374
Federal Register / Vol. 80, No. 171 / Thursday, September 3, 2015 / Notices
Digital Media Enterprise Fee. The
Exchange believes that the proposed
Digital Media Enterprise Fee for EDGA
Book Viewer provides for an equitable
allocation of reasonable fees among
recipients of the data and is not
designed to permit unfair
discrimination among customers,
brokers, or dealers. In establishing the
Digital Media Enterprise Fee, the
Exchange recognizes that there is
demand for a more seamless and easierto-administer data distribution model
that takes into account the expanded
variety of media and communication
devices that investors utilize today. The
Exchange believes the Digital Media
Enterprise Fee will be easy to
administer because data recipients that
purchase it would not be required to
differentiate between Professional and
Non-Professional Users, account for the
extent of access to the data, or report the
number of Users. This is a significant
reduction on a recipient firm’s
administrative burdens and is a
significant value to investors. For
example, a television broadcaster could
display EDGA Book Viewer data during
market-related programming and on its
Web site or allow viewers to view the
data via their mobile devices, creating a
more seamless distribution model that
will allow investors more choice in how
they receive and view market data, all
without having to account for and/or
measure who accesses the data and how
often they do so.
The proposed Digital Media
Enterprise Fee is equitable and
reasonable because it will also enable
recipient firms to more widely
distribute data from EDGA Book Viewer
to investors for informational purposes
at a lower cost than is available today.
For example, a recipient firm may
purchase an Enterprise license in the
amount of $20,000 per month for to
receive EDGA Book Viewer from an
External Distributor that receives the
product for an unlimited number of
Professional and Non-Professional
Users, which is greater than the
proposed Digital Media Enterprise Fee.
The Exchange also believes the amount
of the Digital Media Enterprise Fee is
reasonable as compared to the existing
enterprise fees discussed above because
the distribution of EDGA Book Viewer
data is limited to television, Web sites,
and mobile devices for informational
purposes only, while distribution of
EDGA Book Viewer data pursuant to an
Enterprise license contains no such
limitation. The Exchange also believes
that the proposed Digital Media
Enterprise Fee is equitable and
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reasonable because it is less than similar
fees charged by other exchanges.25
(B) Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
The Exchange’s ability to price EDGA
Book Viewer is constrained by: (i)
Competition among exchanges, other
trading platforms, and Trade Reporting
Facilities (‘‘TRF’’) that compete with
each other in a variety of dimensions;
(ii) the existence of inexpensive realtime consolidated data and marketspecific data and free delayed data; and
(iii) the inherent contestability of the
market for proprietary data.
The Exchange and its market data
products are subject to significant
competitive forces and the proposed
fees represent responses to that
competition. To start, the Exchange
competes intensely for order flow. It
competes with the other national
securities exchanges that currently trade
equities, with electronic communication
networks, with quotes posted in
FINRA’s Alternative Display Facility,
with alternative trading systems, and
with securities firms that primarily
trade as principal with their customer
order flow.
In addition, EDGA Book Viewer
competes with a number of alternative
products. For instance, EDGA Book
Viewer does provide a complete picture
of all trading activity in a security.
Rather, the other national securities
exchanges, the several TRFs of FINRA,
and Electronic Communication
Networks (‘‘ECN’’) that produce
proprietary data all produce trades and
trade reports. Each is currently
permitted to produce last sale
information products, and many
currently do, including Nasdaq and
NYSE. In addition, market participants
can gain access to EDGA last sale and
depth-of-book quotations, though
integrated with the prices of other
markets, on feeds made available
through the SIPs.
In sum, the availability of a variety of
alternative sources of information
imposes significant competitive
pressures on Exchange data products
25 The
Nasdaq Stock Market offers proprietary
data products for distribution over the internet and
television under alternative fee schedules that are
subject to maximum fee of $50,000 per month. See
Nasdaq Rule 7039(b). The NYSE charges a Digit
Media Enterprise fee of $40,000 per month for the
NYSE Trade Digital Media product. See Securities
Exchange Act Release No. 69272 (April 2, 2013), 78
FR 20983 (April 8, 2013) (SR–NYSE–2013–23).
PO 00000
Frm 00098
Fmt 4703
Sfmt 4703
and the Exchange’s compelling need to
attract order flow imposes significant
competitive pressure on the Exchange to
act equitably, fairly, and reasonably in
setting the proposed data product fees.
The proposed data product fees are, in
part, responses to that pressure. The
Exchange believes that the proposed
fees would reflect an equitable
allocation of its overall costs to users of
its facilities.
In addition, when establishing the
proposed fees, the Exchange considered
the competitiveness of the market for
proprietary data and all of the
implications of that competition. The
Exchange believes that it has considered
all relevant factors and has not
considered irrelevant factors in order to
establish fair, reasonable, and not
unreasonably discriminatory fees and an
equitable allocation of fees among all
Users. The existence of alternatives to
EDGA Book Viewer, including existing
similar feeds by other exchanges,
consolidated data, and proprietary data
from other sources, ensures that the
Exchange cannot set unreasonable fees,
or fees that are unreasonably
discriminatory, when vendors and
subscribers can elect these alternatives
or choose not to purchase a specific
proprietary data product if its cost to
purchase is not justified by the returns
any particular vendor or subscriber
would achieve through the purchase.
(C) Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received written 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 26 and paragraph (f) of Rule
19b–4 thereunder.27 At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposal is
26 15
27 17
E:\FR\FM\03SEN1.SGM
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
03SEN1
Federal Register / Vol. 80, No. 171 / Thursday, September 3, 2015 / Notices
consistent with the Act. Comments may
be submitted by any of the following
methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–75782; File No. SR–FINRA–
2015–025]
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rulecomments@sec.gov. Please include File
No. SR–EDGA–2015–34 on the subject
line.
Self-Regulatory Organizations;
Financial Industry Regulatory
Authority, Inc.; Order Approving
Proposed Rule Change To Require
Members To Report Transactions in
TRACE-Eligible Securities as Soon as
Practicable
Paper Comments
August 28, 2015.
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE.,
Washington, DC 20549–1090.
I. Introduction
On July 2, 2015, Financial Industry
Regulatory Authority, Inc. (‘‘FINRA’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend FINRA Rule 6730,
which governs the reporting of eligible
transactions to its Trade Reporting and
Compliance Engine (‘‘TRACE’’). The
proposed rule change was published for
comment in the Federal Register on July
16, 2015.3 The Commission received
two comment letters on the proposed
rule change.4 FINRA responded to the
comment letters on August 20, 2015.5
This order approves the proposed rule
change.
tkelley on DSK3SPTVN1PROD with NOTICES
All submissions should refer to File No.
SR–EDGA–2015–34. 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 such
filing will also 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 No. SR–EDGA–
2015–34 and should be submitted on or
before September 24, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.28
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–21872 Filed 9–2–15; 8:45 am]
BILLING CODE 8011–01–P
28 17
CFR 200.30–3(a)(12).
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II. Description of the Proposed Rule
Change
FINRA Rule 6730 currently requires
that each FINRA member that is a Party
to a Transaction 6 in a TRACE-Eligible
Security 7 report the transaction within
15 minutes of the Time of Execution,8
unless a different time period for the
security is otherwise specified in the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 75428
(July 10, 2015), 80 FR 42149.
4 See letter from Darren Wasney, Program
Manager, Financial Information Forum, to Robert
W. Errett, Deputy Secretary, Commission, dated
August 5, 2015 (‘‘FIF Letter’’) and letter from
Michael Nicholas, Chief Executive Officer, Bond
Dealers of America, to Secretary, Commission,
dated August 6, 2015 (‘‘BDA Letter’’).
5 See letter from Racquel L. Russell, Associate
General Counsel, FINRA, to Robert W. Errett,
Deputy Secretary, Commission, dated August 20,
2015 (‘‘FINRA Response Letter’’).
6 FINRA Rule 6710(e) provides that a ‘‘Party to a
Transaction’’ is an introducing broker-dealer, if any,
an executing broker-dealer, or a customer.
‘‘Customer’’ includes a broker-dealer that is not a
FINRA member.
7 See FINRA Rule 6710(a) (defining ‘‘TRACEEligible Security’’).
8 FINRA Rule 6710(d) provides, among other
things, that the ‘‘Time of Execution’’ for a
transaction in a TRACE-Eligible Security is the time
when the Parties to a Transaction agree to all of the
terms of the transaction that are sufficient to
calculate the dollar price of the trade.
2 17
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53375
rule. Otherwise, the transaction report
will be deemed ‘‘late.’’ The proposed
rule change amends Rule 6730 to
provide that, for a TRACE-Eligible
Security subject to dissemination, each
member that is a Party to a Transaction
must report the transaction to TRACE as
soon as practicable, but no later than
within 15 minutes of the Time of
Execution or other timeframe specified
in Rule 6730. Further, the proposed rule
change adds new Supplementary
Material .03 that requires members to
adopt policies and procedures
reasonably designed to comply with this
amendedrequirement by implementing,
without delay, systems that commence
the trade reporting process at the Time
of Execution. The proposed rule change
also provides that, where a member has
in place such reasonably designed
policies, procedures, and systems, the
member generally will not be viewed as
violating the ‘‘as soon as practicable’’
reporting requirement because of delays
that are due to extrinsic factors that are
not reasonably predictable and where
the member does not purposely intend
to delay the reporting of the trade. The
proposed rule change states that in no
event may a member purposely
withhold trade reports, for example, by
programming its systems to delay
reporting until the end of the reporting
time period.
The proposed rule change also
recognizes that members may manually
report transactions in TRACE-Eligible
Securities and, as a result, the trade
reporting process may not be completed
as quickly as where an automated trade
reporting system is used. FINRA states
that, in these cases, in determining
whether the member’s policies and
procedures are reasonably designed to
report the trade ‘‘as soon as
practicable,’’ it will take into
consideration the manual nature of the
member’s trade reporting process.
While the current rules provide time
periods for members to conduct the
necessary actions to report transactions,
FINRA cites concerns about members
delaying the reporting of executed
transactions, particularly, for example,
by imbedding into the trade reporting
process deliberate delays until the end
of the reporting time period. FINRA also
represents that it observed instances
that appear to indicate that firms have
taken more time than is operationally
necessary to report trades, which raises
the possibility that certain firms may
have intentionally delayed trade
reporting, possibly to delay public
dissemination of the trade. FINRA
believes that such conduct is
inconsistent with the purpose of the
trade reporting rules and that it is
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]]>Agencies
[Federal Register Volume 80, Number 171 (Thursday, September 3, 2015)]
[Notices]
[Pages 53370-53375]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-21872]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-75787; File No. SR-EDGA-2015-34]
Self-Regulatory Organizations; EDGA Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Related to
Fees for a Market Data Product Known as EDGA Book Viewer
August 28, 2015.
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 August 24, 2015, EDGA Exchange, Inc. (the ``Exchange'' or
``EDGA'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II
and III below, which Items have been prepared by the Exchange. The
Exchange has
[[Page 53371]]
designated the proposed rule change as one establishing or changing a
member due, fee, or other charge imposed by the Exchange under Section
19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) thereunder,\4\
which renders the proposed rule change effective upon filing with the
Commission. 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.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange filed a proposal to amend the Market Data section of
its fee schedule to adopt fees for a market data product called EDGA
Book Viewer.
The text of the proposed rule change is available at the Exchange's
Web site at www.batstrading.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the 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 parts of such
statements.
(A) Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Market Data section of its fee
schedule to adopt fees for market data product called EDGA Book Viewer.
EDGA Book Viewer is a data feed that disseminates, on a real-time
basis, the aggregated two-side quotations for up to five (5) price
levels for all displayed orders for securities traded on the Exchange
and for which the Exchanges reports quotes under the Consolidated Tape
Association (``CTA'') Plan or the Nasdaq/UTP Plan. EDGA Book Viewer
also contains the last ten (10) trades including time of trade, price
and share quantity.\5\ EDGA Book Viewer is currently available via
www.batstrading.com without charge.
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 75712 (August 17,
2015), 80 FR 50881 (August 21, 2015) (SR-EDGA-2015-31) (Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change to
Amend Rule 13.8 to Describe the Market Data Product EDGA Book
Viewer).
---------------------------------------------------------------------------
The Exchange now proposes to amend its fee schedule to incorporate
fees for distribution of EDGA Book Viewer to subscribers.\6\ EDGA Book
Viewer will remain available via www.batstrading.com for viewing
without charge. The proposed fees include the following, each of which
are described in detail below: (i) Distribution Fees for both Internal
and External Distributors; \7\ (ii) Usage Fees for both Professional
\8\ and Non-Professional \9\ Users; \10\ (iii) an Enterprise Fee; \11\
and (iv) a Digital Media Enterprise Fee.
---------------------------------------------------------------------------
\6\ The Exchange notes that its affiliated exchanges, EDGX
Exchange, Inc. (``EDGX''), BATS Y-Exchange, Inc. (``BYX'') and BATS
Exchange, Inc. (``BZX'', together with the Exchange, EDGX and BYX,
the ``BATS Exchanges''), also intent to file proposed rule changes
with Commission to adopt similar fees for their respective Book
Viewer market data product.
\7\ A ``Distributor'' is defined as ``any entity that receives
the Exchange Market Data product directly from the Exchange or
indirectly through another entity and then distributes it internally
or externally to a third party.'' See the Exchange Fee Schedule
available at https://batstrading.com/support/fee_schedule/edga/. An
``Internal Distributor'' is defined as ``a Distributor that receives
the Exchange Market Data product and then distributes that data to
one or more Users within the Distributor's own entity.'' Id. An
``External Distributor'' is defined as ``a Distributor that receives
the Exchange Market Data product and then distributes that data to a
third party or one or more Users outside the Distributor's own
entity.'' Id.
\8\ A ``Professional User'' is defined as ``any User other than
a Non-Professional User.'' See the Exchange Fee Schedule available
at https://batstrading.com/support/fee_schedule/edga/.
\9\ A ``Non-Professional User'' is defined as ``a natural person
who is not: (i) Registered or qualified in any capacity with the
Commission, the Commodity Futures Trading Commission, any state
securities agency, any securities exchange or association, or any
commodities or futures contract market or association; (ii) engaged
as an ``investment adviser'' as that term is defined in Section
[202(a)(11)] of the Investment Advisers Act of 1940 (whether or not
registered or qualified under that Act); or (iii) employed by a bank
or other organization exempt from registration under federal or
state securities laws to perform functions that would require
registration or qualification if such functions were performed for
an organization not so exempt.'' Id.
\10\ The Exchange notes that User fees as well as the
distinctions based on professional and non-professional users have
been previously filed with or approved by the Commission by the BATS
Exchanges and the Nasdaq Stock Market LLC (``Nasdaq''). See
Securities Exchange Act Release No. 59582 (March 16, 2009), 74 FR
12423 (March 24, 2009) (Order approving SR-Nasdaq-2008-102). See
also See Securities Exchange Act Release Nos. 74285 (February 18,
2015), 80 FR 9828 (February 24, 2015) (SR-BATS-2015-11); 74283
(February 18, 2015), 80 FR 9809 (February 24, 2015) (SR-EDGA-2015-
09); 74282 (February 17, 2015), 80 FR 9487 (February 23, 2015) (SR-
EDGX-2015-09); and 74284 (February 18, 2015), 80 FR 9792 (February
24, 2015) (SR-BYX-2015-09) (``Initial BATS One Feed Fee Filings'').
\11\ The Exchange notes that Enterprise fees have been
previously filed with or approved by the Commission by the Exchange,
EDGA, BYX, BZX, Nasdaq, NYSE, and the CTA/CQ Plans. See Nasdaq Rule
7047. Securities Exchange Act Release Nos. 71507 (February 7, 2014),
79 FR 8763 (February 13, 2014) (SR-NASDAQ-2014-011); 70211 (August
15, 2013), 78 FR 51781 (August 21, 2013) (SR-NYSE-2013-58); and
70010 (July 19, 2013) (File No. SR-CTA/CQ-2013-04). See also the
Initial BATS One Feed Fee Filings, supra note 10.
---------------------------------------------------------------------------
Distribution Fees. As proposed, each Internal Distributor that
receives EDGA Book Viewer shall pay a fee of $500 per month. The
Exchange does not propose to charge any User fees for EDGA Book Viewer
where the data is received and subsequently internally distributed to
Professional or Non-Professional Users. In addition, the Exchange
proposes to charge External Distributors that receives EDGA Book Viewer
a fee of $2,500 per month.
User Fees. The Exchange proposes to charge those who receive EDGA
Book Viewer from External Distributors different fees for both their
Professional Users and Non-Professional Users. The Exchange will assess
a monthly fee for Professional Users of $3.00 per User. Non-
Professional Users will be assessed a monthly fee of $0.10 per User.
The Exchange does not propose to charge per User fees to Internal
Distributors.
External Distributors that receives EDGA Book Viewer would be
required to count every Professional User and Non-Professional User to
which they provide EDGA Book Viewer, the requirements for which are
identical to that currently in place for the BATS One Feed.\12\ Thus,
the External Distributor's count will include every person and device
that accesses the data regardless of the purpose for which the
individual or device uses the data. External Distributors must report
all Professional and Non-Professional Users in accordance with the
following:
---------------------------------------------------------------------------
\12\ See the Initial BATS One Feed Fee Filings, supra note 10.
---------------------------------------------------------------------------
In connection with an External Distributor's distribution
of EDGA Book Viewer, the Distributor should count as one User each
unique User that the Distributor has entitled to have access to EDGA
Book Viewer. However, where a device is dedicated specifically to a
single individual, the Distributor should count only the individual and
need not count the device.
The External Distributor should identify and report each
unique User. If a User uses the same unique method to gain access to
EDGA Book Viewer, the Distributor should count that as one User.
However, if a unique User uses multiple methods to gain access to
[[Page 53372]]
EDGA Book Viewer (e.g., a single User has multiple passwords and user
identifications), the External Distributor should report all of those
methods as an individual User.
External Distributors should report each unique individual
person who receives access through multiple devices as one User so long
as each device is dedicated specifically to that individual.
If an External Distributor entitles one or more
individuals to use the same device, the External Distributor should
include only the individuals, and not the device, in the count.
Each External Distributor will receive a credit against its monthly
Distributor Fee for EDGA Book Viewer equal to the amount of its monthly
Usage Fees up to a maximum of the Distributor Fee for EDGA Book Viewer.
For example, an External Distributor will be subject to a $2,500
monthly Distributor Fee where they receive EDGA Book Viewer. If that
External Distributor reports User quantities totaling $2,500 or more of
monthly usage of EDGA Book Viewer, it will pay no net Distributor Fee,
whereas if that same External Distributor were to report User
quantities totaling $1,000 of monthly usage, it will pay a net of
$1,500 for the Distributor Fee. External Distributors will remain
subject to the per User fees discussed above.
Enterprise Fee. The Exchange also proposes to establish a $20,000
per month Enterprise Fee that will permit a recipient firm who receives
EDGA Book Viewer from an External Distributor to receive the data for
an unlimited number of Professional and Non-Professional Users. For
example, if a recipient firm had 15,000 Professional Users who each
receive EDGA Book Viewer at $3.00 per month, then that recipient firm
will pay $45,000 per month in Professional Users fees. Under the
proposed Enterprise Fee, the recipient firm will pay a flat fee of
$20,000 for an unlimited number of Professional and Non-Professional
Users for EDGA Book Viewer. A recipient firm must pay a separate
Enterprise Fee for each External Distributor that controls the display
of EDGA Book Viewer if it wishes such User to be covered by an
Enterprise Fee rather than by per User fees. A recipient firm that pays
the Enterprise Fee will not have to report its number of such Users on
a monthly basis. However, every six months, a recipient firm must
provide the Exchange with a count of the total number of natural person
users of each product, including both Professional and Non-Professional
Users. Lastly, the proposed Enterprise Fee would be counted towards the
Distributor Fee credit described above, under which an External
Distributor receives a credit towards its Distributor Fee equal to the
amount of its monthly EDGA Book Viewer User fees.
Digital Media Enterprise Fee. The Exchange proposes to adopt a
Digital Media Enterprise Fee of $5,000 per month for EDGA Book Viewer.
As an alternative to proposed User fees discussed above, a recipient
firm may purchase a monthly Digital Media Enterprise license to receive
EDGA Book Viewer from an External Distributor to distribute to an
unlimited number of Professional and Non-Professional Users for viewing
via television, Web sites, and mobile devices for informational and
non-trading purposes only without having to account for the extent of
access to the data or the report the number of Users to the Exchange.
Lastly, the proposed Digital Media Enterprise Fee would be counted
towards the Distributor Fee credit described above, under which an
External Distributor receives a credit towards its Distributor Fee
equal to the amount of its monthly EDGA Book Viewer User fees.
Implementation Date
The Exchange proposes to implement the proposed changes to its fee
schedule on September 8, 2015.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\13\ in general, and
furthers the objectives of Section 6(b)(4),\14\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its members and other recipients of
Exchange data. The Exchange believes that the proposed rates are
equitable and non-discriminatory in that they apply uniformly to all
recipients of Exchange data. The Exchange believes the proposed fees
are competitive with those charged by other venues and, therefore,
reasonable and equitably allocated to recipients. Lastly, the Exchange
also believes that the proposed fees are reasonable and non-
discriminatory because they will apply uniformly to all recipients of
Exchange data.
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\13\ 15 U.S.C. 78f.
\14\ 15 U.S.C. 78f(b)(4).
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The Exchange also believes that the proposed rule change is
consistent with Section 11(A) of the Act \15\ in that it supports (i)
fair competition among brokers and dealers, among exchange markets, and
between exchange markets and markets other than exchange markets and
(ii) the availability to brokers, dealers, and investors of information
with respect to quotations for and transactions in securities.
Furthermore, the proposed rule change is consistent with Rule 603 of
Regulation NMS,\16\ which provides that any national securities
exchange that distributes information with respect to quotations for or
transactions in an NMS stock do so on terms that are not unreasonably
discriminatory. In adopting Regulation NMS, the Commission granted
self-regulatory organizations and broker-dealers increased authority
and flexibility to offer new and unique market data to the public. It
was believed that this authority would expand the amount of data
available to consumers, and also spur innovation and competition for
the provision of market data.
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\15\ 15 U.S.C. 78k-1.
\16\ See 17 CFR 242.603.
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In addition, the proposed fees would not permit unfair
discrimination because all of the Exchange's customers and market data
vendors will be subject to the proposed fees on an equivalent basis.
EDGA Book Viewer is distributed and purchased on a voluntary basis, in
that neither the Exchange nor market data distributors are required by
any rule or regulation to make this data available. Accordingly,
Distributors and Users can discontinue use at any time and for any
reason, including due to an assessment of the reasonableness of fees
charged. Firms have a wide variety of alternative market data products
from which to choose, such as similar proprietary data products offered
by other exchanges and consolidated data. Moreover, the Exchange is not
required to make any proprietary data products available or to offer
any specific pricing alternatives to any customers.
In addition, the fees that are the subject of this rule filing are
constrained by competition. As explained below in the Exchange's
Statement on Burden on Competition, the existence of alternatives to
EDGA Book Viewer further ensures that the Exchange cannot set
unreasonable fees, or fees that are unreasonably discriminatory, when
vendors and subscribers can elect such alternatives. That is, the
Exchange competes with other exchanges (and their affiliates) that
provide similar market data products. If another exchange (or its
affiliate) were to charge less to distribute its similar product than
the Exchange charges to consolidate and distribute EDGA Book Viewer,
prospective Users likely would
[[Page 53373]]
not subscribe to, or would cease subscribing to, EDGA Book Viewer.
The Exchange notes that the Commission is not required to undertake
a cost-of-service or rate-making approach. The Exchange believes that,
even if it were possible as a matter of economic theory, cost-based
pricing for non-core market data would be so complicated that it could
not be done practically.\17\
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\17\ The Exchange believes that cost-based pricing would be
impractical because it would create enormous administrative burdens
for all parties, including the Commission, to cost-regulate a large
number of participants and standardize and analyze extraordinary
amounts of information, accounts, and reports. In addition, it is
impossible to regulate market data prices in isolation from prices
charged by markets for other services that are joint products. Cost-
based rate regulation would also lead to litigation and may distort
incentives, including those to minimize costs and to innovate,
leading to further waste. Under cost-based pricing, the Commission
would be burdened with determining a fair rate of return, and the
industry could experience frequent rate increases based on
escalating expense levels. Even in industries historically subject
to utility regulation, cost-based ratemaking has been discredited.
As such, the Exchange believes that cost-based ratemaking would be
inappropriate for proprietary market data and inconsistent with
Congress's direction that the Commission use its authority to foster
the development of the national market system, and that market
forces will continue to provide appropriate pricing discipline. See
Appendix C to NYSE's comments to the Commission's 2000 Concept
Release on the Regulation of Market Information Fees and Revenues,
which can be found on the Commission's Web site at https://www.sec.gov/rules/concept/s72899/buck1.htm. See also Securities
Exchange Act Release No. 73816 (December 11, 2014), 79 FR 75200
(December 17, 2014) (SR-NYSE-2014-64) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change to Establish an
Access Fee for the NYSE Best Quote and Trades Data Feed, Operative
December 1, 2014).
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Distributor Fee. The Exchange believes that the proposed
Distributor Fees are also reasonable, equitably allocated, and not
unreasonably discriminatory. The fees for Members and non-Members are
uniform except with respect to reasonable distinctions with respect to
internal and external distribution.\18\ The Exchange believes that the
Distributor Fees for EDGA Book Viewer are reasonable and fair in light
of alternatives offered by other market centers. For example, EDGA Book
Viewer provides investors with alternative market data and competes
with similar market data product currently offered by the New York
Stock Exchange, Inc. (``NYSE'') and the Nasdaq Stock Market LLC
(``Nasdaq'').\19\ Specifically, the NYSE charges an access fee of
$5,000 per month for NYSE OpenBook,\20\ which is higher than the
External Distributor fee proposed herein for EDGA Book Viewer.
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\18\ The Exchange notes that distinctions based on external
versus internal distribution have been previously filed with the
Commission by Nasdaq, Nasdaq OMX BX, and Nasdaq OMX PSX. See Nasdaq
Rule 019(b); see also Securities Exchange Act Release No. 62876
(September 9, 2010), 75 FR 56624 (September 16, 2010) (SR-PHLX-2010-
120); Securities Exchange Act Release No. 62907 (September 14,
2010), 75 FR 57314 (September 20, 2010) (SR-NASDAQ-2010-110);
Securities Exchange Act Release No. 63442 (December 6, 2010), 75 FR
77029 (December 10, 2010) (SR-BX-2010-081). See also the Initial
BATS One Feed Fee Filings, supra note 10.
\19\ See Nasdaq Rule 7023(a)(1)(C) (describing Nasdaq TotalView
is a depth-of-book data feed that includes all orders and quotes
from all Nasdaq members displayed in the Nasdaq Market Center as
well as the aggregate size of such orders and quotes at each price
level in the execution functionality of the Nasdaq Market Center).
See also Nasdaq Book Viewer, a description of which is available at
https://data.nasdaq.com/Book Viewer.aspx (last visited July 29,
2015). See NYSE OpenBook available at https://www.nyxdata.com/openbook (last visited July 29, 2015) (providing real-time view of
the NYSE limit order book).
\20\ See NYSE Market Data Pricing dated May 2015 available at
https://www.nyxdata.com/. Nasdaq charges distribution fees ranging
from $300 for 1-10 subscribers to $75,000 for more than $250 [sic]
subscribers. See Nasdaq Rule 7023(b)(4).
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User Fees. The Exchange believes that implementing the Professional
and Non-Professional User fees for EDGA Book Viewer are equitable and
reasonable because they will result in greater availability to
Professional and Non-Professional Users. Moreover, introducing a modest
Non-Professional User fee for EDGA Book Viewer is reasonable because it
provides an additional method for retail investors to access EDGA Book
Viewer data by providing the same data that is available to
Professional Users. The Exchange believes that the proposed fees are
equitable and not unfairly discriminatory because they will be charged
uniformly to recipient firms and Users. The fee structure of
differentiated Professional and Non-Professional fees is utilized by
the Exchange for the BATS One Feed and has long been used by other
exchanges for their proprietary data products, and by the Nasdaq UTP
and the CTA and CQ Plans in order to reduce the price of data to retail
investors and make it more broadly available.\21\ Offering EDGA Book
Viewer to Non-Professional Users with the same data available to
Professional Users results in greater equity among data recipients.
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\21\ See the Initial BATS One Feed Fee Filings, supra note 10.
See also, e.g., Securities Exchange Act Release No. 20002, File No.
S7-433 (July 22, 1983) (establishing nonprofessional fees for CTA
data); Nasdaq Rules 7023(b), 7047.
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In addition, the proposed fees are reasonable when compared to
similar fees for comparable products offered by the NYSE and Nasdaq.
Specifically, NYSE offers NYSE OpenBook for a monthly fee of $60.00 per
professional subscriber and $15 per non-professional subscriber.\22\
Nasdaq offers Nasdaq BookViewer for the same fees as Nasdaq TotalView,
which is a monthly fee of $70.00 per professional subscriber and $14
per non-professional subscriber.\23\ The Exchange's proposed per User
Fees for EDGA Book Viewer are less than the NYSE and Nasdaq fees.
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\22\ See NYSE Market Data Pricing dated May 2015 available at
https://www.nyxdata.com/.
\23\ See Nasdaq Rule 7023(b)(2).
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Enterprise Fee. The proposed Enterprise Fee for EDGA Book Viewer is
equitable and reasonable as the fees proposed are less than the
enterprise fees currently charged for Nasdaq Book Viewer, which is
subject to the exact same fees as Nasdaq TotalView. Nasdaq charges an
enterprise fee of $100,000 per month for Nasdaq TotalView,\24\ which is
far greater than the proposed Enterprise Fee of $20,000 per month for
EDGA Book Viewer. In addition, the Enterprise Fee proposed by the
Exchange could result in a fee reduction for recipient firms with a
large number of Professional and Non-Professional Users. If a recipient
firm has a smaller number of Professional Users of EDGA Book Viewer,
then it may continue using the per User structure and benefit from the
per User Fee reductions. By reducing prices for recipient firms with a
large number of Professional and Non-Professional Users, the Exchange
believes that more firms may choose to receive and to distribute EDGA
Book Viewer, thereby expanding the distribution of this market data for
the benefit of investors.
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\24\ See Nasdaq Rule 7023(c)(2) (stating that a distributor that
is also a broker-dealer pays a monthly fee of $100,000 for the right
to provide Nasdaq TotalView and for display usage for internal
distribution, or for external distribution to both professional and
non-professional subscribers with whom the firm has a brokerage
relationship.) Nasdaq also charges an enterprise fee of $25,000 to
provide Nasdaq TotalView to an unlimited number of non-professional
subscribers only. See Nasdaq Rule 7023(c)(1).
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The Exchange further believes that the proposed Enterprise Fee is
reasonable because it will simplify reporting for certain recipients
that have large numbers of Professional and Non-Professional Users.
Firms that pay the proposed Enterprise Fee will not have to report the
number of Users on a monthly basis as they currently do, but rather
will only have to count natural person users every six months, which is
a significant reduction in administrative burden. Finally, the Exchange
believes that it is equitable and not unfairly discriminatory to
establish an Enterprise Fee because it reduces the Exchange's costs and
the Distributor's administrative burdens in tracking and auditing large
numbers of Users.
[[Page 53374]]
Digital Media Enterprise Fee. The Exchange believes that the
proposed Digital Media Enterprise Fee for EDGA Book Viewer provides for
an equitable allocation of reasonable fees among recipients of the data
and is not designed to permit unfair discrimination among customers,
brokers, or dealers. In establishing the Digital Media Enterprise Fee,
the Exchange recognizes that there is demand for a more seamless and
easier-to-administer data distribution model that takes into account
the expanded variety of media and communication devices that investors
utilize today. The Exchange believes the Digital Media Enterprise Fee
will be easy to administer because data recipients that purchase it
would not be required to differentiate between Professional and Non-
Professional Users, account for the extent of access to the data, or
report the number of Users. This is a significant reduction on a
recipient firm's administrative burdens and is a significant value to
investors. For example, a television broadcaster could display EDGA
Book Viewer data during market-related programming and on its Web site
or allow viewers to view the data via their mobile devices, creating a
more seamless distribution model that will allow investors more choice
in how they receive and view market data, all without having to account
for and/or measure who accesses the data and how often they do so.
The proposed Digital Media Enterprise Fee is equitable and
reasonable because it will also enable recipient firms to more widely
distribute data from EDGA Book Viewer to investors for informational
purposes at a lower cost than is available today. For example, a
recipient firm may purchase an Enterprise license in the amount of
$20,000 per month for to receive EDGA Book Viewer from an External
Distributor that receives the product for an unlimited number of
Professional and Non-Professional Users, which is greater than the
proposed Digital Media Enterprise Fee. The Exchange also believes the
amount of the Digital Media Enterprise Fee is reasonable as compared to
the existing enterprise fees discussed above because the distribution
of EDGA Book Viewer data is limited to television, Web sites, and
mobile devices for informational purposes only, while distribution of
EDGA Book Viewer data pursuant to an Enterprise license contains no
such limitation. The Exchange also believes that the proposed Digital
Media Enterprise Fee is equitable and reasonable because it is less
than similar fees charged by other exchanges.\25\
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\25\ The Nasdaq Stock Market offers proprietary data products
for distribution over the internet and television under alternative
fee schedules that are subject to maximum fee of $50,000 per month.
See Nasdaq Rule 7039(b). The NYSE charges a Digit Media Enterprise
fee of $40,000 per month for the NYSE Trade Digital Media product.
See Securities Exchange Act Release No. 69272 (April 2, 2013), 78 FR
20983 (April 8, 2013) (SR-NYSE-2013-23).
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(B) Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended. The
Exchange's ability to price EDGA Book Viewer is constrained by: (i)
Competition among exchanges, other trading platforms, and Trade
Reporting Facilities (``TRF'') that compete with each other in a
variety of dimensions; (ii) the existence of inexpensive real-time
consolidated data and market-specific data and free delayed data; and
(iii) the inherent contestability of the market for proprietary data.
The Exchange and its market data products are subject to
significant competitive forces and the proposed fees represent
responses to that competition. To start, the Exchange competes
intensely for order flow. It competes with the other national
securities exchanges that currently trade equities, with electronic
communication networks, with quotes posted in FINRA's Alternative
Display Facility, with alternative trading systems, and with securities
firms that primarily trade as principal with their customer order flow.
In addition, EDGA Book Viewer competes with a number of alternative
products. For instance, EDGA Book Viewer does provide a complete
picture of all trading activity in a security. Rather, the other
national securities exchanges, the several TRFs of FINRA, and
Electronic Communication Networks (``ECN'') that produce proprietary
data all produce trades and trade reports. Each is currently permitted
to produce last sale information products, and many currently do,
including Nasdaq and NYSE. In addition, market participants can gain
access to EDGA last sale and depth-of-book quotations, though
integrated with the prices of other markets, on feeds made available
through the SIPs.
In sum, the availability of a variety of alternative sources of
information imposes significant competitive pressures on Exchange data
products and the Exchange's compelling need to attract order flow
imposes significant competitive pressure on the Exchange to act
equitably, fairly, and reasonably in setting the proposed data product
fees. The proposed data product fees are, in part, responses to that
pressure. The Exchange believes that the proposed fees would reflect an
equitable allocation of its overall costs to users of its facilities.
In addition, when establishing the proposed fees, the Exchange
considered the competitiveness of the market for proprietary data and
all of the implications of that competition. The Exchange believes that
it has considered all relevant factors and has not considered
irrelevant factors in order to establish fair, reasonable, and not
unreasonably discriminatory fees and an equitable allocation of fees
among all Users. The existence of alternatives to EDGA Book Viewer,
including existing similar feeds by other exchanges, consolidated data,
and proprietary data from other sources, ensures that the Exchange
cannot set unreasonable fees, or fees that are unreasonably
discriminatory, when vendors and subscribers can elect these
alternatives or choose not to purchase a specific proprietary data
product if its cost to purchase is not justified by the returns any
particular vendor or subscriber would achieve through the purchase.
(C) Self-Regulatory Organization's Statement on Comments on the
Proposed Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written 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 \26\ and paragraph (f) of Rule 19b-4
thereunder.\27\ At any time within 60 days of the filing of the
proposed rule change, the Commission summarily may temporarily suspend
such rule change if it appears to the Commission that such action is
necessary or appropriate in the public interest, for the protection of
investors, or otherwise in furtherance of the purposes of the Act.
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\26\ 15 U.S.C. 78s(b)(3)(A).
\27\ 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 proposal is
[[Page 53375]]
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 No. SR-EDGA-2015-34 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE., Washington, DC 20549-1090.
All submissions should refer to File No. SR-EDGA-2015-34. 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 such filing will also 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 No. SR-EDGA-2015-34 and should be
submitted on or before September 24, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\28\
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\28\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-21872 Filed 9-2-15; 8:45 am]
BILLING CODE 8011-01-P
