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]

Download as PDF 53370 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, tkelley on DSK3SPTVN1PROD with NOTICES 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 VerDate Sep<11>2014 14:42 Sep 02, 2015 Jkt 235001 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). PO 00000 Frm 00094 Fmt 4703 Sfmt 4703 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 E:\FR\FM\03SEN1.SGM 03SEN1 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. tkelley on DSK3SPTVN1PROD with NOTICES (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 VerDate Sep<11>2014 14:42 Sep 02, 2015 Jkt 235001 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 http://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 http:// 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’’). PO 00000 Frm 00095 Fmt 4703 Sfmt 4703 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. E:\FR\FM\03SEN1.SGM 03SEN1 tkelley on DSK3SPTVN1PROD with NOTICES 53372 Federal Register / Vol. 80, No. 171 / Thursday, September 3, 2015 / Notices 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 VerDate Sep<11>2014 14:42 Sep 02, 2015 Jkt 235001 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 PO 00000 Frm 00096 Fmt 4703 16 See Sfmt 4703 E:\FR\FM\03SEN1.SGM 17 CFR 242.603. 03SEN1 Federal Register / Vol. 80, No. 171 / Thursday, September 3, 2015 / Notices tkelley on DSK3SPTVN1PROD with NOTICES 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 http:// 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. VerDate Sep<11>2014 14:42 Sep 02, 2015 Jkt 235001 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 http://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 http://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 Frm 00097 Fmt 4703 Sfmt 4703 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 http://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). E:\FR\FM\03SEN1.SGM 03SEN1 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 VerDate Sep<11>2014 14:42 Sep 02, 2015 Jkt 235001 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 (http://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 (http://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). VerDate Sep<11>2014 14:42 Sep 02, 2015 Jkt 235001 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 PO 00000 Frm 00099 Fmt 4703 Sfmt 4703 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 E:\FR\FM\03SEN1.SGM 03SEN1

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]


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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.
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    \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).
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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.
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    \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).
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    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.
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    \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 http://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 http://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.
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    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.
---------------------------------------------------------------------------

    \13\ 15 U.S.C. 78f.
    \14\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------

    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.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78k-1.
    \16\ See 17 CFR 242.603.
---------------------------------------------------------------------------

    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\
---------------------------------------------------------------------------

    \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 http://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 http://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 
http://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 
http://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 (http://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 (http://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