Self-Regulatory Organizations; International Securities Exchange, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the Schedule of Fees, 74181-74184 [2015-30090]
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Federal Register / Vol. 80, No. 228 / Friday, November 27, 2015 / Notices
Internet portals, such as Google, impose
a discipline by providing only data that
will enable them to attract ‘‘eyeballs’’
that contribute to their advertising
revenue. Retail broker-dealers, such as
Schwab and Fidelity, offer their
customers proprietary data only if it
promotes trading and generates
sufficient commission revenue.
Although the business models may
differ, these vendors’ pricing discipline
is the same: they can simply refuse to
purchase any proprietary data product
that fails to provide sufficient value.
The Exchange and other producers of
proprietary data products must
understand and respond to these
varying business models and pricing
disciplines in order to market
proprietary data products successfully.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
members or other interested parties.
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)(ii) of the Act,9 and
subparagraph (f)(2) of Rule 19b–4
thereunder,10 because it establishes a
due, fee, or other charge imposed by ISE
Gemini.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
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IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
9 15
U.S.C. 78s(b)(3)(A)(ii).
CFR 240.19b–4(f)(2).
19:01 Nov 25, 2015
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
ISEGemini–2015–26 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–ISEGemini–2015–26. 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 also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
ISEGemini–2015–26, and should be
submitted on or before December 18,
2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–30089 Filed 11–25–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76501; File No. SR–ISE–
2015–40]
Self-Regulatory Organizations;
International Securities Exchange,
LLC; Notice of Filing and Immediate
Effectiveness of Proposed Rule
Change To Amend the Schedule of
Fees
November 20, 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 November
6, 2015, the International Securities
Exchange, LLC (the ‘‘Exchange’’ or
‘‘ISE’’) 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 selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
ISE proposes to amend the Schedule
of Fees as described in more detail
below. The text of the proposed rule
change is available on the Exchange’s
Internet Web site at https://www.ise.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
self-regulatory organization has
prepared summaries, set forth in
Sections A, B and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The purpose of the proposed rule
change is to amend the Schedule of Fees
to offer a one (1) month free trial of the
1 15
10 17
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Electronic Comments
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CFR 200.30–3(a)(12).
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2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 80, No. 228 / Friday, November 27, 2015 / Notices
ISE Open/Close Trade Profile End of
Day market data offering to all members
and non-members who have never
before subscribed to the offering and to
remove the discounts offered to
subscribers of multiple market data
feeds.
ISE Open/Close Trade Profile
ISE currently sells a market data
offering comprised of the entire opening
and closing trade data of ISE listed
options of both customers and firms,
referred to by the Exchange as the ISE
Open/Close Trade Profile. The ISE
Open/Close Trade Profile offering is
subdivided by origin code (i.e.,
customer or firm) and the customer data
is then further subdivided by order size.
The volume data is summarized by day
and series (i.e., symbol, expiration date,
strike price, call or put). The ISE Open/
Close Trade Profile enables subscribers
to create their own proprietary put/call
calculations. The data is compiled and
formatted by ISE as an end of day file
(‘‘ISE Open/Close Trade Profile End of
Day’’). This market data offering is
currently available to both members and
non-members on an annual subscription
basis. The current subscription rate for
both members and non-members is $750
per month with an annual subscription.
The Exchange now proposes to amend
its Schedule of Fees to offer a one (1)
month free trial of the ISE Open/Close
Trade Profile End of Day market data
offering to all members and nonmembers that have never before
subscribed to the offering. This will give
potential subscribers the ability to use
and test the data offering before signing
up for an annual subscription.
Multi-Fee Discount
The Exchange currently offers five
real-time market data feed offerings.3 In
order to encourage subscriptions to
multiple market data feeds, ISE adopted
a multi-product subscription discount,
which offers a ten percent (10%)
discount for subscribers who subscribe
to two feeds and twenty percent (20%)
discount for subscribers who subscribe
to three feeds.4 The Exchange now
proposes to remove the discounts for
subscribers of multiple feeds.
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
3 The market data feeds are: Real-time Depth of
Market Raw Data Feed, ISE Order Feed, ISE Top
Quote Feed, ISE Spread Feed, and ISE Implied
Volatility and Greeks Feed.
4 See Securities Exchange Act Release No. 34–
65002 (August 1, 2011), 76 FR 47630 (August 5,
2011) (SR–ISE–2011–50).
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19:01 Nov 25, 2015
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the provisions of Section 6 of the Act,5
in general, and Section 6(b)(4) of the
Act,6 in particular, in that it is designed
to provide for the equitable allocation of
reasonable dues, fees, and other charges
among its members and other persons
using its facilities.
In particular, the Exchange believes
the proposed free trial is reasonable and
equitable because it gives potential
subscribers the ability to use and test
the ISE Open/Close Trade Profile End of
Day offering prior to committing to an
annual subscription. Furthermore, the
Exchange believes that the proposed
free trial is not unfairly discriminatory
because it is available to all similarlysituated market participants—members
and non-members who have never
subscribed to the market data offering.
Similarly, the removal of the multiproduct subscription discount is also
reasonable and equitable because the
ISE believes the discount is no longer
necessary to encourage multiple
subscriptions. Further, the Exchange
believes that the proposed removal of
the discount is not unfairly
discriminatory because it applies to all
members and non-members who are
subscribers to the feeds.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,7 the Exchange does not believe
that the proposed rule change will
impose any burden on intermarket or
intramarket competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. First, the
proposed free trial does not affect
competition because it is designed to
give potential subscribers the ability to
use and test the ISE data offering prior
to committing to an annual
subscription. Next, the removal of the
multi-product, market data discount
reflects the intense competition among
exchanges and the cost of producing
market data as further described below.
Notwithstanding its determination
that the Commission may rely upon
competition to establish fair and
equitably allocated fees for market data,
the NetCoaltion [sic] court found that
the Commission had not, in that case,
compiled a record that adequately
supported its conclusion that the market
for the data at issue in the case was
competitive. The Exchange believes that
a record may readily be established to
demonstrate the competitive nature of
the market in question.
5 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
7 15 U.S.C. 78f(b)(8).
6 15
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For the reasons discussed above, the
Exchange believes that the Dodd-Frank
Act amendments to Section 19
materially alter the scope of the
Commission’s review of future market
data filings, by creating a presumption
that all fees may take effect
immediately, without prior analysis by
the Commission of the competitive
environment. Even in the absence of
this important statutory change,
however, the Exchange believes that a
record may readily be established to
demonstrate the competitive nature of
the market in question.
There is intense competition between
exchanges that provide transaction
execution and routing services and
proprietary data products. Transaction
execution and proprietary data products
are complementary in that market data
is both an input and a byproduct of the
execution service. In fact, market data
and trade execution are a paradigmatic
example of joint products with joint
costs. The decision whether and on
which exchange to post an order will
depend on the attributes of the exchange
where the order can be posted,
including the execution fees, data
quality and price and distribution of its
data products. Without the prospect of
a taking order seeing and reacting to a
posted order on a particular exchange,
the posting of the order would
accomplish little. Without trade
executions, exchange data products
cannot exist. Data products are valuable
to many end users only insofar as they
provide information that end users
expect will assist them or their
customers in making trading decisions.
The costs of producing market data
include not only the costs of the data
distribution infrastructure, but also the
costs of designing, maintaining, and
operating the exchange’s transaction
execution platform and the cost of
regulating the exchange to ensure its fair
operation and maintain investor
confidence. The total return that an
exchange earns reflects the revenues it
receives from both products and the
joint costs it incurs. Moreover, an
exchange’s customers view the costs of
transaction executions and of data as a
unified cost of doing business with the
exchange. A broker-dealer will direct
orders to a particular exchange only if
the expected revenues from executing
trades on the exchange exceed net
transaction execution costs and the cost
of data that the broker-dealer chooses to
buy to support its trading decisions (or
those of its customers). The choice of
data products is, in turn, a product of
the value of the products in making
profitable trading decisions. If the cost
of the product exceeds its expected
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Federal Register / Vol. 80, No. 228 / Friday, November 27, 2015 / Notices
value, the broker-dealer will choose not
to buy it.
Moreover, as a broker-dealer chooses
to direct fewer orders to a particular
exchange, the value of the product to
that broker-dealer decreases, for two
reasons. First, the product will contain
less information, because executions of
the broker-dealer’s orders will not be
reflected in it. Second, and perhaps
more important, the product will be less
valuable to that broker-dealer because it
does not provide information about the
venue to which it is directing its orders.
Data from the competing venue to
which the broker-dealer is directing
orders will become correspondingly
more valuable. Thus, a supercompetitive increase in the fees charged
for either transactions or data has the
potential to impair revenues from both
products. ‘‘No one disputes that
competition for order flow is ‘fierce’.’’ 8
However, the existence of fierce
competition for order flow implies a
high degree of price sensitivity on the
part of broker-dealers with order flow,
since they may readily reduce costs by
directing orders toward the lowest-cost
trading venues. A broker-dealer that
shifted its order flow from one platform
to another in response to order
execution price differentials would both
reduce the value of that platform’s
market data and reduce its own need to
consume data from the disfavored
platform. Similarly, if a platform
increases its market data fees, the
change will affect the overall cost of
doing business with the platform, and
affected broker-dealers will assess
whether they can lower their trading
costs by directing orders elsewhere and
thereby lessening the need for the more
expensive data.
Analyzing the cost of market data
distribution in isolation from the cost of
all of the inputs supporting the creation
of market data will inevitably
underestimate the cost of the data. Thus,
because it is impossible to create data
without a fast, technologically robust,
and well-regulated execution system,
system costs and regulatory costs affect
the price of market data. It would be
equally misleading, however, to
attribute all of the exchange’s costs to
the market data portion of an exchange’s
joint product. Rather, all of the
exchange’s costs are incurred for the
unified purposes of attracting order
flow, executing and/or routing orders,
and generating and selling data about
market activity. The total return that an
exchange earns reflects the revenues it
receives from the joint products and the
total costs of the joint products.
8
NetCoalition, at 24.
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19:01 Nov 25, 2015
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Competition among exchanges can be
expected to constrain the aggregate
return each exchange earns from the
sale of its joint products, but different
exchanges may choose from a range of
possible, and equally reasonable,
pricing strategies as the means of
recovering total costs. For example,
some exchanges may choose to pay
rebates to attract orders, charge
relatively low prices for market
information (or provide information free
of charge) and charge relatively high
prices for accessing posted liquidity.
Other exchanges may choose a strategy
of paying lower rebates (or no rebates)
to attract orders, setting relatively high
prices for market information, and
setting relatively low prices for
accessing posted liquidity. In this
environment, there is no economic basis
for regulating maximum prices for one
of the joint products in an industry in
which suppliers face competitive
constraints with regard to the joint
offering.
The market for market data products
is competitive and inherently
contestable because there is fierce
competition for the inputs necessary to
the creation of proprietary data and
strict pricing discipline for the
proprietary products themselves.
Numerous exchanges compete with
each other for listings, trades, and
market data itself, providing virtually
limitless opportunities for entrepreneurs
who wish to produce and distribute
their own market data. This proprietary
data is produced by each individual
exchange.
Market data vendors provide another
form of price discipline for proprietary
data products because they control the
primary means of access to end users.
Vendors impose price restraints based
upon their business models. For
example, vendors such as Bloomberg
and Reuters that assess a surcharge on
data they sell may refuse to offer
proprietary products that end users will
not purchase in sufficient numbers.
Internet portals, such as Google, impose
a discipline by providing only data that
will enable them to attract ‘‘eyeballs’’
that contribute to their advertising
revenue. Retail broker-dealers, such as
Schwab and Fidelity, offer their
customers proprietary data only if it
promotes trading and generates
sufficient commission revenue.
Although the business models may
differ, these vendors’ pricing discipline
is the same: they can simply refuse to
purchase any proprietary data product
that fails to provide sufficient value.
The Exchange and other producers of
proprietary data products must
understand and respond to these
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74183
varying business models and pricing
disciplines in order to market
proprietary data products successfully.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange has not solicited, and
does not intend to solicit, comments on
this proposed rule change. The
Exchange has not received any
unsolicited written comments from
members or other interested parties.
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)(ii) of the Act,9 and
subparagraph (f)(2) of Rule 19b–4
thereunder,10 because it establishes a
due, fee, or other charge imposed by
ISE.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s Internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
ISE–2015–40 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–ISE–2015–40. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
9
15 U.S.C. 78s(b)(3)(A)(ii).
17 CFR 240.19b–4(f)(2).
10
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74184
Federal Register / Vol. 80, No. 228 / Friday, November 27, 2015 / Notices
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 also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–ISE–
2015–40, and should be submitted on or
before December 18, 2015.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.11
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015–30090 Filed 11–25–15; 8:45 am]
BILLING CODE 8011–01–P
[Release No. 34–76487; File No. SR–BX–
2015–068]
Self-Regulatory Organizations;
NASDAQ OMX BX, Inc.; Notice of Filing
and Immediate Effectiveness of
Proposed Rule Change Relating to BX
PRISM
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November 20, 2015.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
9, 2015, NASDAQ OMX BX, Inc. (‘‘BX’’
or the ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I and
II below, which Items have been
The Exchange proposes to amend BX
Rules at Chapter VI, Section 9, entitled
‘‘Price Improvement Auction
(‘‘PRISM’’),’’ to correct two crossreferences to BX Rules. The text of the
proposed rule change is available on the
Exchange’s Web site at https://
nasdaqomxbx.cchwallstreet.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 aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
The Exchange proposes to amend BX
Rules at Chapter VI, Section 9, entitled
‘‘Price Improvement Auction
(‘‘PRISM’’)’’ to correct two crossreferences to BX Rules. Specifically, the
Exchange cited to its Size Pro-Rata
allocation algorithm in the BX PRISM
Rule at Chapter VI, Section 9(ii)(E). The
cite was to Chapter VI, Section
10(1)(C)(1)(a) when it should have cited
to Section 10(1)(C)(2). Further, the
Exchange cited to its Price/Time
allocation algorithm in the BX PRISM
Rule at Chapter VI, Section 9(ii)(F). The
cite was to Chapter VI, Section
10(1)(C)(2)(1) when it should have cited
to Section 10(1)(C)(1). These
clarifications to the BX PRISM rule will
update the Rulebook and help avoid
confusion for Participants. The
proposed changes are non-substantive
rule changes.
2. Statutory Basis
17 CFR 200.30–3(a)(12).
1 15 U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
11
19:01 Nov 25, 2015
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
1. Purpose
SECURITIES AND EXCHANGE
COMMISSION
VerDate Sep<11>2014
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
The Exchange believes that its
proposal is consistent with Section 6(b)
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of the Act 3 in general, and furthers the
objectives of Section 6(b)(5) of the Act 4
in particular, in that it is designed to
promote just and equitable principles of
trade, to remove impediments to and
perfect the mechanism of a free and
open market and a national market
system, and, in general to protect
investors and the public interest, by
correcting citation errors within the BX
Rulebook.
The Exchange’s proposal to correct
the citations will serve to avoid
confusion as to the correct algorithm.
The proposed changes are nonsubstantive rule changes.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
BX does not believe that the proposed
rule change will impose any burden on
competition that is not necessary or
appropriate in furtherance of the
purposes of the Act. The proposed
changes do not impose any burden on
competition, rather, the non-substantive
rule changes correct incorrect references
within the Rulebook. As a result, there
will be no substantive changes to the
Exchange’s operations or its rules.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 5 and Rule
19b–4(f)(6) thereunder.6 Because the
proposed rule change does not: (i)
Significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
3 15
U.S.C. 78f(b).
U.S.C. 78f(b)(5).
5 15 U.S.C. 78s(b)(3)(A)(iii).
6 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
4 15
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]]>Agencies
[Federal Register Volume 80, Number 228 (Friday, November 27, 2015)]
[Notices]
[Pages 74181-74184]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-30090]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76501; File No. SR-ISE-2015-40]
Self-Regulatory Organizations; International Securities Exchange,
LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule
Change To Amend the Schedule of Fees
November 20, 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 November 6, 2015, the International Securities Exchange, LLC
(the ``Exchange'' or ``ISE'') 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 self-
regulatory organization. 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.
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I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
ISE proposes to amend the Schedule of Fees as described in more
detail below. The text of the proposed rule change is available on the
Exchange's Internet Web site at https://www.ise.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 self-regulatory organization has prepared summaries,
set forth in Sections A, B and C below, of the most significant aspects
of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of the proposed rule change is to amend the Schedule of
Fees to offer a one (1) month free trial of the
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ISE Open/Close Trade Profile End of Day market data offering to all
members and non-members who have never before subscribed to the
offering and to remove the discounts offered to subscribers of multiple
market data feeds.
ISE Open/Close Trade Profile
ISE currently sells a market data offering comprised of the entire
opening and closing trade data of ISE listed options of both customers
and firms, referred to by the Exchange as the ISE Open/Close Trade
Profile. The ISE Open/Close Trade Profile offering is subdivided by
origin code (i.e., customer or firm) and the customer data is then
further subdivided by order size. The volume data is summarized by day
and series (i.e., symbol, expiration date, strike price, call or put).
The ISE Open/Close Trade Profile enables subscribers to create their
own proprietary put/call calculations. The data is compiled and
formatted by ISE as an end of day file (``ISE Open/Close Trade Profile
End of Day''). This market data offering is currently available to both
members and non-members on an annual subscription basis. The current
subscription rate for both members and non-members is $750 per month
with an annual subscription.
The Exchange now proposes to amend its Schedule of Fees to offer a
one (1) month free trial of the ISE Open/Close Trade Profile End of Day
market data offering to all members and non-members that have never
before subscribed to the offering. This will give potential subscribers
the ability to use and test the data offering before signing up for an
annual subscription.
Multi-Fee Discount
The Exchange currently offers five real-time market data feed
offerings.\3\ In order to encourage subscriptions to multiple market
data feeds, ISE adopted a multi-product subscription discount, which
offers a ten percent (10%) discount for subscribers who subscribe to
two feeds and twenty percent (20%) discount for subscribers who
subscribe to three feeds.\4\ The Exchange now proposes to remove the
discounts for subscribers of multiple feeds.
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\3\ The market data feeds are: Real[hyphen]time Depth of Market
Raw Data Feed, ISE Order Feed, ISE Top Quote Feed, ISE Spread Feed,
and ISE Implied Volatility and Greeks Feed.
\4\ See Securities Exchange Act Release No. 34-65002 (August 1,
2011), 76 FR 47630 (August 5, 2011) (SR-ISE-2011-50).
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2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\5\ in general, and Section
6(b)(4) of the Act,\6\ in particular, in that it is designed to provide
for the equitable allocation of reasonable dues, fees, and other
charges among its members and other persons using its facilities.
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\5\ 15 U.S.C. 78f.
\6\ 15 U.S.C. 78f(b)(4).
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In particular, the Exchange believes the proposed free trial is
reasonable and equitable because it gives potential subscribers the
ability to use and test the ISE Open/Close Trade Profile End of Day
offering prior to committing to an annual subscription. Furthermore,
the Exchange believes that the proposed free trial is not unfairly
discriminatory because it is available to all similarly-situated market
participants--members and non-members who have never subscribed to the
market data offering. Similarly, the removal of the multi-product
subscription discount is also reasonable and equitable because the ISE
believes the discount is no longer necessary to encourage multiple
subscriptions. Further, the Exchange believes that the proposed removal
of the discount is not unfairly discriminatory because it applies to
all members and non-members who are subscribers to the feeds.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\7\ the Exchange does
not believe that the proposed rule change will impose any burden on
intermarket or intramarket competition that is not necessary or
appropriate in furtherance of the purposes of the Act. First, the
proposed free trial does not affect competition because it is designed
to give potential subscribers the ability to use and test the ISE data
offering prior to committing to an annual subscription. Next, the
removal of the multi-product, market data discount reflects the intense
competition among exchanges and the cost of producing market data as
further described below.
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\7\ 15 U.S.C. 78f(b)(8).
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Notwithstanding its determination that the Commission may rely upon
competition to establish fair and equitably allocated fees for market
data, the NetCoaltion [sic] court found that the Commission had not, in
that case, compiled a record that adequately supported its conclusion
that the market for the data at issue in the case was competitive. The
Exchange believes that a record may readily be established to
demonstrate the competitive nature of the market in question.
For the reasons discussed above, the Exchange believes that the
Dodd-Frank Act amendments to Section 19 materially alter the scope of
the Commission's review of future market data filings, by creating a
presumption that all fees may take effect immediately, without prior
analysis by the Commission of the competitive environment. Even in the
absence of this important statutory change, however, the Exchange
believes that a record may readily be established to demonstrate the
competitive nature of the market in question.
There is intense competition between exchanges that provide
transaction execution and routing services and proprietary data
products. Transaction execution and proprietary data products are
complementary in that market data is both an input and a byproduct of
the execution service. In fact, market data and trade execution are a
paradigmatic example of joint products with joint costs. The decision
whether and on which exchange to post an order will depend on the
attributes of the exchange where the order can be posted, including the
execution fees, data quality and price and distribution of its data
products. Without the prospect of a taking order seeing and reacting to
a posted order on a particular exchange, the posting of the order would
accomplish little. Without trade executions, exchange data products
cannot exist. Data products are valuable to many end users only insofar
as they provide information that end users expect will assist them or
their customers in making trading decisions.
The costs of producing market data include not only the costs of
the data distribution infrastructure, but also the costs of designing,
maintaining, and operating the exchange's transaction execution
platform and the cost of regulating the exchange to ensure its fair
operation and maintain investor confidence. The total return that an
exchange earns reflects the revenues it receives from both products and
the joint costs it incurs. Moreover, an exchange's customers view the
costs of transaction executions and of data as a unified cost of doing
business with the exchange. A broker-dealer will direct orders to a
particular exchange only if the expected revenues from executing trades
on the exchange exceed net transaction execution costs and the cost of
data that the broker-dealer chooses to buy to support its trading
decisions (or those of its customers). The choice of data products is,
in turn, a product of the value of the products in making profitable
trading decisions. If the cost of the product exceeds its expected
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value, the broker-dealer will choose not to buy it.
Moreover, as a broker-dealer chooses to direct fewer orders to a
particular exchange, the value of the product to that broker-dealer
decreases, for two reasons. First, the product will contain less
information, because executions of the broker-dealer's orders will not
be reflected in it. Second, and perhaps more important, the product
will be less valuable to that broker-dealer because it does not provide
information about the venue to which it is directing its orders. Data
from the competing venue to which the broker-dealer is directing orders
will become correspondingly more valuable. Thus, a super-competitive
increase in the fees charged for either transactions or data has the
potential to impair revenues from both products. ``No one disputes that
competition for order flow is `fierce'.'' \8\ However, the existence of
fierce competition for order flow implies a high degree of price
sensitivity on the part of broker-dealers with order flow, since they
may readily reduce costs by directing orders toward the lowest-cost
trading venues. A broker-dealer that shifted its order flow from one
platform to another in response to order execution price differentials
would both reduce the value of that platform's market data and reduce
its own need to consume data from the disfavored platform. Similarly,
if a platform increases its market data fees, the change will affect
the overall cost of doing business with the platform, and affected
broker-dealers will assess whether they can lower their trading costs
by directing orders elsewhere and thereby lessening the need for the
more expensive data.
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\8\ NetCoalition, at 24.
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Analyzing the cost of market data distribution in isolation from
the cost of all of the inputs supporting the creation of market data
will inevitably underestimate the cost of the data. Thus, because it is
impossible to create data without a fast, technologically robust, and
well-regulated execution system, system costs and regulatory costs
affect the price of market data. It would be equally misleading,
however, to attribute all of the exchange's costs to the market data
portion of an exchange's joint product. Rather, all of the exchange's
costs are incurred for the unified purposes of attracting order flow,
executing and/or routing orders, and generating and selling data about
market activity. The total return that an exchange earns reflects the
revenues it receives from the joint products and the total costs of the
joint products.
Competition among exchanges can be expected to constrain the
aggregate return each exchange earns from the sale of its joint
products, but different exchanges may choose from a range of possible,
and equally reasonable, pricing strategies as the means of recovering
total costs. For example, some exchanges may choose to pay rebates to
attract orders, charge relatively low prices for market information (or
provide information free of charge) and charge relatively high prices
for accessing posted liquidity. Other exchanges may choose a strategy
of paying lower rebates (or no rebates) to attract orders, setting
relatively high prices for market information, and setting relatively
low prices for accessing posted liquidity. In this environment, there
is no economic basis for regulating maximum prices for one of the joint
products in an industry in which suppliers face competitive constraints
with regard to the joint offering.
The market for market data products is competitive and inherently
contestable because there is fierce competition for the inputs
necessary to the creation of proprietary data and strict pricing
discipline for the proprietary products themselves. Numerous exchanges
compete with each other for listings, trades, and market data itself,
providing virtually limitless opportunities for entrepreneurs who wish
to produce and distribute their own market data. This proprietary data
is produced by each individual exchange.
Market data vendors provide another form of price discipline for
proprietary data products because they control the primary means of
access to end users. Vendors impose price restraints based upon their
business models. For example, vendors such as Bloomberg and Reuters
that assess a surcharge on data they sell may refuse to offer
proprietary products that end users will not purchase in sufficient
numbers. Internet portals, such as Google, impose a discipline by
providing only data that will enable them to attract ``eyeballs'' that
contribute to their advertising revenue. Retail broker-dealers, such as
Schwab and Fidelity, offer their customers proprietary data only if it
promotes trading and generates sufficient commission revenue. Although
the business models may differ, these vendors' pricing discipline is
the same: they can simply refuse to purchase any proprietary data
product that fails to provide sufficient value. The Exchange and other
producers of proprietary data products must understand and respond to
these varying business models and pricing disciplines in order to
market proprietary data products successfully.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange has not solicited, and does not intend to solicit,
comments on this proposed rule change. The Exchange has not received
any unsolicited written comments from members or other interested
parties.
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)(ii) of the Act,\9\ and subparagraph (f)(2) of Rule 19b-4
thereunder,\10\ because it establishes a due, fee, or other charge
imposed by ISE.
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\9\ 15 U.S.C. 78s(b)(3)(A)(ii).
\10\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please include
File Number SR-ISE-2015-40 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-ISE-2015-40. This file
number should be included on the subject line if email is used. To help
the Commission process and review your
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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 also will be available for inspection and copying at the
principal office of the Exchange. All comments received will be posted
without change; the Commission does not edit personal identifying
information from submissions. You should submit only information that
you wish to make available publicly. All submissions should refer to
File Number SR-ISE-2015-40, and should be submitted on or before
December 18, 2015.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\11\
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\11\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2015-30090 Filed 11-25-15; 8:45 am]
BILLING CODE 8011-01-P
