Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Regarding NASDAQ Last Sale Plus, 81584-81588 [2015-32896]
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Federal Register / Vol. 80, No. 250 / Wednesday, December 30, 2015 / Notices
of the Act 22 and paragraph (f) of Rule
19b–4 thereunder.23 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 proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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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–
BYX–2015–51 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
Number SR–BYX–2015–51. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
22 15
23 17
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f).
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submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–BYX–
2015–51, and should be submitted on or
before January 20, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Brent J. Fields,
Secretary.
[FR Doc. 2015–32898 Filed 12–29–15; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–76769; File No. SR–
NASDAQ–2015–150]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change Regarding
NASDAQ Last Sale Plus
December 24, 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 December
14, 2015, The NASDAQ Stock Market
LLC (‘‘NASDAQ’’ or ‘‘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 prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend
Rule 7039 (NASDAQ Last Sale and Last
Sale Plus Data Feed) with language
regarding NASDAQ Last Sale (‘‘NLS’’)
Plus (‘‘NLS Plus’’), a comprehensive
data feed offered by NASDAQ OMX
Information LLC 3 that allows data
24 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 NASDAQ OMX Information LLC is a subsidiary
of Nasdaq, Inc. (formerly, The NASDAQ OMX
Group, Inc.), separate and apart from The NASDAQ
Stock Market LLC. The primary purpose of
NASDAQ OMX Information LLC is to combine
publicly available data from the three filed last sale
products of the exchange subsidiaries of Nasdaq,
Inc. and from the network processors for the ease
and convenience of market data users and vendors,
and ultimately the investing public. In that role, the
function of NASDAQ OMX Information LLC is
analogous to that of other market data vendors, and
it has no competitive advantage over other market
data vendors; NASDAQ OMX Information LLC
1 15
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distributors to access the three last sale
products offered by each of Nasdaq,
Inc.’s three U.S. equity markets.4
Specifically, this proposal would allow
NLS Plus to reflect cumulative
consolidated volume (‘‘consolidated
volume’’) of real-time trading activity
for Tape A securities and Tape B
securities. Currently, consolidated
volume on NLS Plus is real-time only
for Tape C securities and is 15 minute
delayed for Tape A securities and Tape
B securities.5 The Exchange also
proposes to remove two duplicative
terms in the rule.
The text of the proposed rule change
is available on the Exchange’s Web site
at https://nasdaq.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.
performs precisely the same functions as
Bloomberg, Thomson Reuters, and other market
data vendors.
4 The Nasdaq, Inc. U.S. equity markets include
the Exchange, NASDAQ OMX BX (‘‘BX’’), and
NASDAQ OMX PSX (‘‘PSX’’) (together known as
the ‘‘NASDAQ OMX equity markets’’). PSX and BX
are filing companion proposals similar to this one.
NASDAQ’s last sale product, NASDAQ Last Sale,
includes last sale information from the FINRA/
NASDAQ Trade Reporting Facility (‘‘FINRA/
NASDAQ TRF’’), which is jointly operated by
NASDAQ and the Financial Industry Regulatory
Authority (‘‘FINRA’’). See Securities Exchange Act
Release No. 71350 (January 17, 2014), 79 FR 4218
(January 24, 2014) (SR–FINRA–2014–002). For
proposed rule changes submitted with respect to
NASDAQ Last Sale, BX Last Sale, and PSX Last
Sale, see, e.g., Securities Exchange Act Release Nos.
57965 (June 16, 2008), 73 FR 35178, (June 20, 2008)
(SR–NASDAQ–2006–060) (order approving
NASDAQ Last Sale data feeds pilot); 61112
(December 4, 2009), 74 FR 65569, (December 10,
2009) (SR–BX–2009–077) (notice of filing and
immediate effectiveness regarding BX Last Sale data
feeds); and 62876 (September 9, 2010), 75 FR
56624, (September 16, 2010) (SR–Phlx–2010–120)
(notice of filing and immediate effectiveness
regarding PSX Last Sale data feeds).
5 Tape A and Tape B securities are disseminated
pursuant to the Security Industry Automation
Corporation’s (‘‘SIAC’’) Consolidated Tape
Association Plan/Consolidated Quotation System,
or CTA/CQS (‘‘CTA’’). Tape C securities are
disseminated pursuant to the NASDAQ Unlisted
Trading Privileges (‘‘UTP’’) Plan.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
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1. Purpose
The purpose of this proposal is to
amend Rule 7039(d). Specifically, this
proposal would allow NLS Plus to
reflect consolidated volume of real-time
trading activity for Tape A securities
and Tape B securities. Now,
consolidated volume on NLS Plus is
real-time only for Tape C securities. The
Exchange also proposes to remove two
duplicative terms in the rule.
NLS Plus, which is reflected in Rule
7039(d),6 allows data distributors to
access last sale products offered by each
of Nasdaq, Inc.’s three equity exchanges.
Thus, NLS Plus includes all transactions
from all of Nasdaq, Inc.’s equity
markets, as well as FINRA/NASDAQ
TRF data that is included in the current
NLS product. In addition, NLS Plus
features total cross-market volume
information at the issue level, thereby
providing redistribution of consolidated
volume information from the securities
information processors (‘‘SIPs’’) for
Tape A, B, and C securities, currently
real-time for Tape C securities and 15minute delayed for Tape A and Tape B
securities. Thus, NLS Plus covers all
securities listed on NASDAQ and New
York Stock Exchange (‘‘NYSE’’) (now
under the Intercontinental Exchange
(‘‘ICE’’) umbrella), as well as US
‘‘regional’’ exchanges such as NYSE
MKT, NYSE Arca, and BATS (also
known as BATS/Direct Edge).
NLS Plus offers data for all U.S.
equities via two separate data channels:
The first data channel reflects NASDAQ,
6 See Securities Exchange Act Release Nos. 75257
(June 22, 2015), 80 FR 36862 (June 26, 2015)(SR–
NASDAQ–2015–055) (order approving proposed
rule change regarding NASDAQ Last Sale Plus in
NASDAQ Rule 7039(d)) (the ‘‘NLS Plus Approval
Order’’); 74972 (May 15, 2015), 80 FR 29370 (May
21, 2015)(SR–NASDAQ–2015–055) (notice of filing
of proposed rule change regarding NASDAQ Last
Sale Plus) (the ‘‘NLS Plus notice’’); and 75660
(August 4, 2015), 80 FR 47968 (August 10, 2015)
(SR–NASDAQ–2015–088) (notice of filing and
immediate effectiveness regarding NASDAQ Last
Sale Plus fees).
Other exchanges have data feeds that are similar
to NLS Plus. See Securities Exchange Act Release
Nos. 73918 (December 23, 2014), 79 FR 78920
(December 31, 2014) (SR–BATS–2014–055; SR–
BYX–2014–030; SR–EDGA–2014–25; SR–EDGX–
2014–25) (order approving market data product
called BATS One Feed being offered by four
affiliated exchanges); and 74726 (April 14, 2015), 80
FR 21776 (April 20, 2015) (SR–BATS–2015–29)
(notice of filing and immediate effectiveness to
include consolidated volume in BATS One). See
also Securities Exchange Act Release No. 73553
(November 6, 2014), 79 FR 67491 (November 13,
2014) (SR–NYSE–2014–40) (order granting approval
to establish the NYSE Best Quote & Trades (‘‘BQT’’)
Data Feed).
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BX, and PSX trades with real-time
consolidated volume for NASDAQlisted securities; and the second data
channel reflects NASDAQ, BX, and PSX
trades with delayed consolidated
volume for NYSE, NYSE MKT, NYSE
Arca and BATS-listed securities. The
Exchange believes that market data
distributors may use the NLS Plus data
feed to feed stock tickers, portfolio
trackers, trade alert programs, time and
sale graphs, and other display systems.
The provision of multiple options for
investors to receive market data was a
primary goal of the market data
amendments adopted by Regulation
NMS. Finally, NLS Plus provides
investors with options for receiving
market data that parallel products
currently offered by BATS and BATS Y,
EDGA, and EDGX and NYSE equity
exchanges.7
Consolidated volume reflects the
consolidated volume at the time that the
NLS Plus trade message is generated,
and includes the volume for the issue
symbol as reported on the consolidated
market data feed. The consolidated
volume is based on the real-time trades
reported via the UTP Trade Data Feed
(‘‘UTDF’’) and delayed trades reported
via CTA. NASDAQ calculates the realtime trading volume for its trading
venues, and then adds the real-time
trading volume for the other (nonNASDAQ) trading venues as reported
via the UTDF data feed. For nonNASDAQ-listed issues, the consolidated
volume is based on trades reported via
SIAC’s Consolidated Tape System
(‘‘CTS’’) for the issue symbol. The
Exchange calculates the real-time
trading volume for its trading venues,
and then adds the 15-minute delayed
trading volume for the other (nonNASDAQ) trading venues as reported
via the CTS data feed.
NLS Plus is currently codified in
NASDAQ Rule 7039(d) as follows:
(d) NASDAQ Last Sale Plus. NASDAQ Last
Sale Plus is a comprehensive data feed
produced by NASDAQ OMX Information
LLC. It provides last sale data as well as
consolidated volume of NASDAQ U.S. equity
markets (The NASDAQ Stock Market
(‘‘NASDAQ’’), NASDAQ OMX BX (‘‘BX’’),
and NASDAQ OMX PSX (‘‘PSX’’)) and the
NASDAQ/FINRA Trade Reporting Facility
(‘‘TRF’’). NASDAQ Last Sale Plus also
reflects cumulative volume real-time trading
activity across all U.S. exchanges for Tape C
securities and 15-minute delayed information
for Tape A and Tape B securities. NASDAQ
Last Sale Plus also contains: Trade Price,
Trade Size, Sale Condition Modifiers,
Cumulative Consolidated Market Volume,
End of Day Trade Summary, Adjusted
Closing Price, IPO Information, and
Bloomberg ID. Additionally, pertinent
regulatory information such as Market Wide
Circuit Breaker, Reg SHO Short Sale Price
Test Restricted Indicator, Trading Action,
Symbol Directory, Adjusted Closing Price,
and End of Day Trade Summary are
included. NLS Plus may be received by itself
or in combination with NASDAQ Basic.
This proposal essentially reflects one
change to NLS Plus as it currently
exists. Whereas now consolidated
volume on NLS Plus is real-time only
for Tape C securities and is 15 minute
delayed for Tape A and Tape B
securities, this proposal would allow
NLS Plus to reflect consolidated volume
of real-time trading activity as reported
to all of the Tapes. As proposed to be
amended, NASDAQ Rule 7039(d)(1)
[sic] would state:
(d) NASDAQ Last Sale Plus. NASDAQ Last
Sale Plus is a comprehensive data feed
produced by NASDAQ OMX Information
LLC. It provides last sale data as well as
consolidated volume of NASDAQ U.S. equity
markets (The NASDAQ Stock Market
(‘‘NASDAQ’’), NASDAQ OMX BX (‘‘BX’’),
and NASDAQ OMX PSX ‘‘PSX’’)) and the
NASDAQ/FINRA Trade Reporting Facility
(‘‘TRF’’). NASDAQ Last Sale Plus also
reflects cumulative volume real-time trading
activity across all U.S. exchanges for Tape C
securities. NASDAQ Last Sale Plus also
contains: Trade Price, Trade Size, Sale
Condition Modifiers, Cumulative
Consolidated Market Volume, End of Day
Trade Summary, Adjusted Closing Price, IPO
Information, and Bloomberg ID. Additionally,
pertinent regulatory information such as
Market Wide Circuit Breaker, Reg SHO Short
Sale Price Test Restricted Indicator, Trading
Action, and Symbol Directory are included.
NLS Plus may be received by itself or in
combination with NASDAQ Basic.
Additionally, NASDAQ Last Sale Plus
reflects cumulative volume real-time trading
activity across all U.S. exchanges for Tape A
securities and Tape B securities.
Thus, with this proposal consolidated
volume would reflect real-time trading
for all Tape A, Tape B, and Tape C
securities. Market participants have
requested that the Exchange provide
NLS Plus consolidated volume that in
fact reflects real-time trading for all
Tape A, Tape B, and Tape C securities.
The Exchange believes that this
proposal would be of great benefit to
market participants, who could now get
similar, real-time data across all U.S.
markets that are reported to Tapes A, B,
and C. The Exchange believes that its
proposal allowing real-time volume on
the NLS Plus feed is similar to the BATS
One feed, which transmits real-time
data.8
8 See 73918 at 78921: ‘‘[T]he BATS One Feed . . .
disseminates, on a real-time basis, the aggregate best
bid and offer . . . of all displayed orders for
securities traded on the Exchanges and for which
7 Id.
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The Exchange proposes one
housekeeping change. This is a
technical change to remove two terms
that are indicated twice in Rule 7039(d):
‘‘Adjusted Closing Price’’ and ‘‘End of
Day Trade Summary’’.
With respect to latency, as discussed
in previous NLS Plus filings,9 the path
for distribution of NLS Plus is not faster
than the path for distribution that would
be used by a market data vendor to
distribute an independently created
NLS Plus-like product. As such, the
NLS Plus data feed is a data product
that a competing market data vendor
could create and sell without being in
a disadvantaged position relative to the
Exchange. In recognition that the
Exchange is the source of its own
market data and with being [sic] equity
markets owned by Nasdaq, Inc., the
Exchange represents that the source of
the market data it would use to create
proposed NLS Plus is available to other
vendors. In fact, the overwhelming
majority of the data elements and
messages in NLS Plus are exactly the
same as, and in fact are sourced from,
NLS, BX Last Sale, and PSX Last Sale,
each of which is available to other
market data vendors. The will [sic]
continue to make available these
individual underlying data elements,
and thus, the source of the market data
that would be used to create the
proposed NLS Plus is the same as what
is available to other market data
vendors.10
the Exchanges report quotes under the Consolidated
Tape Association . . . Plan or the Nasdaq/UTP
Plan.’’ See also https://cdn.batstrading.com/
resources/release_notes/2015/SIP-Volume-in-BATSOne.pdf: ‘‘The BATS One Feed provides affordable,
comprehensive and accurate real-time quote and
trade data at a fraction of the cost of competitive
products. Retail brokers, investment banks, media
outlets and other firms will have an opportunity to
use the BATS One Feed to build displays that
include real-time SIP Consolidated Volume
reflecting the total trading volume occurring on all
market centers for Tape A, B, and C listed securities
[footnote excluded].’’
9 See Securities Exchange Act Release No. 75763
(August 26, 2015), 80 FR 52817 (September 1, 2015)
(SR–Phlx–2015–72) (notice of filing and immediate
effectiveness).
10 In order to create NLS Plus, the system creating
and supporting NLS Plus receives the individual
data feeds from each of the Nasdaq, Inc. equity
markets and, in turn, aggregates and summarizes
that data to create NLS Plus and then distribute it
to end users. This is the same process that a
competing market data vendor would undergo
should it want to create a market data product
similar to NLS Plus to distribute to its end users.
A competing market data vendor could receive the
individual data feeds from each of the Nasdaq, Inc.
equity markets at the same time the system creating
and supporting NLS Plus would for it to create NLS
Plus. Therefore, a competing market data vendor
could, as discussed, obtain the underlying data
elements from the Nasdaq, Inc. equity markets on
the same latency basis as the system that would be
performing the aggregation and consolidation of
proposed NLS Plus, and provide a similar product
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The Exchange believes that its
proposal would greatly benefit the
public and investors, and is consistent
with the Act.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,11
in general, and with Section 6(b)(5) of
the Act,12 in particular, in that the
proposal is designed to prevent
fraudulent and manipulative acts and
practices, to promote just and equitable
principles of trade, to foster cooperation
and coordination with persons engaged
in regulating, clearing, settling,
processing information with respect to,
and facilitating transactions in
securities, 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.
The purpose of the proposed rule
change is to add language to section (d)
of Rule 7039 regarding real-time data
across all U.S. markets that are reported
to Tapes A, B, and C and are offered on
NLS Plus; and to remove two
duplicative terms from the rule. The
Exchange believes that the proposal
facilitates transactions in securities,
removes impediments to and perfects
the mechanism of a free and open
market and a national market system,
and, in general, protects investors and
the public interest by making available
additional means by which investors
may access real-time volume
information about securities
transactions, thereby providing
investors with additional options for
accessing information that may help to
inform their trading decisions.
The Exchange notes that the
Commission has recently approved a
data product on several exchanges that
is similar to NLS Plus and is real-time,
and specifically determined that the
approved data product was consistent
with the Act.13 NLS Plus simply
to its customers with the same latency they could
achieve by purchasing NLS Plus from the Exchange.
As such, the Exchange would not have any unfair
advantage over competing market data vendors with
respect to NLS Plus. Moreover, in terms of NLS
itself, the Exchange would access the underlying
feed from the same point as would a market data
vendor; as discussed, the Exchange would not have
a speed advantage.
11 15 U.S.C. 78f.
12 15 U.S.C. 78f(b)(5).
13 See Securities Exchange Act Release Nos.
73918 (December 23, 2014), 79 FR 78920 (December
31, 2014) (SR–BATS–2014–055; SR–BYX–2014–
030; SR–EDGA–2014–25; SR–EDGX–2014–25); and
74726 (April 14, 2015), 80 FR 21776 (April 20,
2015) (SR–BATS–2015–29) (notice of filing and
immediate effectiveness to include consolidated
volume in BATS One).
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provides market participants with an
additional option for receiving real-time
market data that has already been the
subject of a proposed rule change and
that is available from myriad market
data vendors.
In adopting Regulation NMS, the
Commission granted SROs and brokerdealers (‘‘BDs’’) 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. The Exchange believes that
its NLS Plus market data product is
precisely the sort of market data product
that the Commission envisioned when it
adopted Regulation NMS. The
Commission concluded that Regulation
NMS—by deregulating the market in
proprietary data—would itself further
the Act’s goals of facilitating efficiency
and competition:
[E]fficiency is promoted when brokerdealers who do not need the data
beyond the prices, sizes, market center
identifications of the NBBO and
consolidated last sale information are
not required to receive (and pay for)
such data. The Commission also
believes that efficiency is promoted
when broker-dealers may choose to
receive (and pay for) additional market
data based on their own internal
analysis of the need for such data.14
By removing unnecessary regulatory
restrictions on the ability of exchanges
to sell their own data, Regulation NMS
advanced the goals of the Act and the
principles reflected in its legislative
history. If the free market should
determine whether proprietary data is
sold to BDs at all, it follows that the
price at which such data is sold should
be set by the market as well. Moreover,
data products such as NLS Plus are a
means by which exchanges compete to
attract order flow. To the extent that
exchanges are successful in such
competition, they earn trading revenues
and also enhance the value of their data
products by increasing the amount of
data they are able to provide.
Conversely, to the extent that exchanges
are unsuccessful, the inputs needed to
add value to data products are
diminished. Accordingly, the need to
compete for order flow places
substantial pressure upon exchanges to
keep their fees for both executions and
data reasonable.
The Exchange believes that, for the
reasons given, the proposal is consistent
with the Act.
14 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005).
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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.
As is true of all NASDAQ’s non-core
data products, NASDAQ’s ability to
offer NLS Plus through NASDAQ OMX
Information LLC and price NLS Plus is
constrained by: (1) Competition between
exchanges and other trading platforms
that compete with each other in a
variety of dimensions; (2) the existence
of inexpensive real-time consolidated
data and market-specific data and free
delayed consolidated data; and (3) the
inherent contestability of the market for
proprietary last sale data. The Exchange
believes that its proposal is procompetitive in that it will allow the
Exchange to distribute consolidated
volume for Tapes A, B, and C on a realtime basis, similarly to a data product
on several exchanges that is similar to
NLS Plus. The Exchange believes that
this would be of great benefit to market
participants, who could now get similar,
real-time data across all U.S. markets
that are reported to Tapes A, B, and C.
In addition, as discussed, NLS Plus
competes directly with a myriad of
similar products and potential products
of market data vendors. This proposal
allows offering on NLS Plus, on a realtime basis, U.S. market data that is
reported to Tapes A, B, and C. NLS Plus
joins the existing market for proprietary
last sale data products that is currently
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, as well as other
entities, in a vigorously competitive
market. Similarly, with respect to the
FINRA/NASDAQ TRF data that is a
component of NLS and NLS Plus,
allowing exchanges to operate TRFs has
permitted them to earn revenues by
providing technology and data in
support of the non-exchange segment of
the market. This revenue opportunity
has also resulted in fierce competition
between the two current TRF operators,
with both TRFs charging extremely low
trade reporting fees and rebating the
majority of the revenues they receive
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from core market data to the parties
reporting trades.
The costs of producing market data
include not only the costs of the data
distribution infrastructure, but also the
costs of designing, maintaining, and
operating the exchange’s transaction
execution platform and the cost of
regulating the exchange to ensure its fair
operation and maintain investor
confidence. The total return that a
trading platform earns reflects the
revenues it receives from both products
and the joint costs it incurs. Moreover,
the operation of the exchange is
characterized by high fixed costs and
low marginal costs. This cost structure
is common in content and content
distribution industries such as software,
where developing new software
typically requires a large initial
investment (and continuing large
investments to upgrade the software),
but once the software is developed, the
incremental cost of providing that
software to an additional user is
typically small, or even zero (e.g., if the
software can be downloaded over the
internet after being purchased).15 In
NASDAQ’s case, it is costly to build and
maintain a trading platform, but the
incremental cost of trading each
additional share on an existing platform,
or distributing an additional instance of
data, is very low. Market information
and executions are each produced
jointly (in the sense that the activities of
trading and placing orders are the
source of the information that is
distributed) and are each subject to
significant scale economies. In such
cases, marginal cost pricing is not
feasible because if all sales were priced
at the margin, NASDAQ would be
unable to defray its platform costs of
providing the joint products. Similarly,
data products cannot make use of TRF
trade reports without the raw material of
the trade reports themselves, and
therefore necessitate the costs of
operating, regulating,16 and maintaining
a trade reporting system, costs that must
be covered through the fees charged for
use of the facility and sales of associated
data.
Competition among trading platforms
can be expected to constrain the
aggregate return each platform earns
from the sale of its joint products, but
different platforms may choose from a
15 See William J. Baumol and Daniel G. Swanson,
‘‘The New Economy and Ubiquitous Competitive
Price Discrimination: Identifying Defensible Criteria
of Market Power,’’ Antitrust Law Journal, Vol. 70,
No. 3 (2003).
16 It should be noted that the costs of operating
the FINRA/NASDAQ TRF borne by NASDAQ
include regulatory charges paid by NASDAQ to
FINRA.
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Fmt 4703
Sfmt 4703
81587
range of possible, and equally
reasonable, pricing strategies as the
means of recovering total costs.
NASDAQ pays rebates to attract orders,
charges relatively low prices for market
information and charges relatively high
prices for accessing posted liquidity.
Other platforms may choose a strategy
of paying lower liquidity rebates to
attract orders, setting relatively low
prices for accessing posted liquidity,
and setting relatively high prices for
market information. Still others may
provide most data free of charge and
rely exclusively on transaction fees to
recover their costs. Finally, some
platforms may incentivize use by
providing opportunities for equity
ownership, which may allow them to
charge lower direct fees for executions
and data.
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. Such regulation is
unnecessary because an ‘‘excessive’’
price for one of the joint products will
ultimately have to be reflected in lower
prices for other products sold by the
firm, or otherwise the firm will
experience a loss in the volume of its
sales that will be adverse to its overall
profitability. In other words, an increase
in the price of data will ultimately have
to be accompanied by a decrease in the
cost of executions, or the volume of both
data and executions will fall.
The competitive nature of the market
for products such as NLS Plus is borne
out by the performance of the market. In
May 2008, the Internet portal Yahoo!
began offering its Web site viewers realtime last sale data (as well as best quote
data) provided by BATS. In response, in
June 2008, NASDAQ launched NLS,
which was initially subject to an
‘‘enterprise cap’’ of $100,000 for
customers receiving only one of the NLS
products, and $150,000 for customers
receiving both products. The majority of
NASDAQ’s sales were at the capped
level. In early 2009, BATS expanded its
offering of free data to include depth-ofbook data. Also in early 2009, NYSE
Arca announced the launch of a
competitive last sale product with an
enterprise price of $30,000 per month.
In response, NASDAQ combined the
enterprise cap for the NLS products and
reduced the cap to $50,000 (i.e., a
reduction of $100,000 per month).
Although each of these products offers
only a specific subset of data available
from the SIPs, NASDAQ believes that
the products are viewed as substitutes
for each other and for core last-sale data,
rather than as products that must be
E:\FR\FM\30DEN1.SGM
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Federal Register / Vol. 80, No. 250 / Wednesday, December 30, 2015 / Notices
obtained in tandem. For example, while
Yahoo! and Google now both
disseminate NASDAQ’s product, several
other major content providers, including
MSN and Morningstar, use the BATS
product. Moreover, further evidence of
competition can be observed in the
recently-developed BATS One Feed and
BQT feed.17
In this environment, 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’.’’
NetCoalition I at 539. The existence of
fierce competition for order flow
implies a high degree of price sensitivity
on the part of BDs with order flow, since
they may readily reduce costs by
directing orders toward the lowest-cost
trading venues. A BD 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. If a
platform increases its market data fees,
the change will affect the overall cost of
doing business with the platform, and
affected BDs will assess whether they
can lower their trading costs by
directing orders elsewhere and thereby
lessening the need for the more
expensive data. Similarly, increases in
the cost of NLS Plus would impair the
willingness of distributors to take a
product for which there are numerous
alternatives, impacting NLS Plus data
revenues, the value of NLS Plus as a tool
for attracting order flow, and ultimately,
the volume of orders routed to NASDAQ
and the value of its other data products.
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.
mstockstill on DSK4VPTVN1PROD with NOTICES
VerDate Sep<11>2014
17:59 Dec 29, 2015
Jkt 238001
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:
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(6). As required under Rule
19b–4(f)(6)(iii), the Exchange provided the
Commission with written notice of its intent to file
the proposed rule change, along with a brief
description and the 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.
20 17 CFR 240.19b–4(f)(6).
21 17 CFR 240.19b–4(f)(6)(iii).
22 See Securities Exchange Act Release Nos.
73918 (December 23, 2014), 79 FR 78920 (December
31, 2014) (SR–BATS–2014–055; SR–BYX–2014–
030; SR–EDGA–2014–25; SR–EDGX–2014–25); and
74726 (April 14, 2015), 80 FR 21776 (April 20,
2015) (SR–BATS–2015–29).
23 For purposes only of waiving the 30-day
operative delay, the Commission has considered the
proposed rule’s impact on efficiency, competition,
and capital formation. See 15 U.S.C. 78c(f).
19 17
Because the foregoing 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 for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
supra note 6.
IV. Solicitation of Comments
18 15
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
17 See
19(b)(3)(A) of the Act 18 and Rule 19b–
4(f)(6) thereunder.19
A proposed rule change filed
pursuant to Rule 19b–4(f)(6) under the
Act 20 normally does not become
operative for 30 days after the date of its
filing. However, Rule 19b–4(f)(6)(iii) 21
permits the Commission to designate a
shorter time if such action is consistent
with the protection of investors and the
public interest. The Exchange has asked
the Commission to waive the 30-day
operative delay so that the NLS Plus
may as soon as possible offer real-time
data across all U.S. markets that are
reported to Tapes A, B, and C, in a
manner similar to other markets.22 The
Commission believes that waiving the
30-day operative delay is consistent
with the protection of investors and the
public interest. Therefore, the
Commission hereby waives the
operative delay and designates the
proposed rule change operative upon
filing.23
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. 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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Fmt 4703
Sfmt 9990
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–
NASDAQ–2015–150 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
Number SR–NASDAQ–2015–150. This
file number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
NASDAQ–2015–150 and should be
submitted on or before January 20, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Brent J. Fields,
Secretary.
[FR Doc. 2015–32896 Filed 12–29–15; 8:45 am]
BILLING CODE 8011–01–P
24 17
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]]>Agencies
[Federal Register Volume 80, Number 250 (Wednesday, December 30, 2015)]
[Notices]
[Pages 81584-81588]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32896]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-76769; File No. SR-NASDAQ-2015-150]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change
Regarding NASDAQ Last Sale Plus
December 24, 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 December 14, 2015, The NASDAQ Stock Market LLC (``NASDAQ'' or
``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 prepared by the Exchange.
The Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to amend Rule 7039 (NASDAQ Last Sale and Last
Sale Plus Data Feed) with language regarding NASDAQ Last Sale (``NLS'')
Plus (``NLS Plus''), a comprehensive data feed offered by NASDAQ OMX
Information LLC \3\ that allows data distributors to access the three
last sale products offered by each of Nasdaq, Inc.'s three U.S. equity
markets.\4\ Specifically, this proposal would allow NLS Plus to reflect
cumulative consolidated volume (``consolidated volume'') of real-time
trading activity for Tape A securities and Tape B securities.
Currently, consolidated volume on NLS Plus is real-time only for Tape C
securities and is 15 minute delayed for Tape A securities and Tape B
securities.\5\ The Exchange also proposes to remove two duplicative
terms in the rule.
---------------------------------------------------------------------------
\3\ NASDAQ OMX Information LLC is a subsidiary of Nasdaq, Inc.
(formerly, The NASDAQ OMX Group, Inc.), separate and apart from The
NASDAQ Stock Market LLC. The primary purpose of NASDAQ OMX
Information LLC is to combine publicly available data from the three
filed last sale products of the exchange subsidiaries of Nasdaq,
Inc. and from the network processors for the ease and convenience of
market data users and vendors, and ultimately the investing public.
In that role, the function of NASDAQ OMX Information LLC is
analogous to that of other market data vendors, and it has no
competitive advantage over other market data vendors; NASDAQ OMX
Information LLC performs precisely the same functions as Bloomberg,
Thomson Reuters, and other market data vendors.
\4\ The Nasdaq, Inc. U.S. equity markets include the Exchange,
NASDAQ OMX BX (``BX''), and NASDAQ OMX PSX (``PSX'') (together known
as the ``NASDAQ OMX equity markets''). PSX and BX are filing
companion proposals similar to this one. NASDAQ's last sale product,
NASDAQ Last Sale, includes last sale information from the FINRA/
NASDAQ Trade Reporting Facility (``FINRA/NASDAQ TRF''), which is
jointly operated by NASDAQ and the Financial Industry Regulatory
Authority (``FINRA''). See Securities Exchange Act Release No. 71350
(January 17, 2014), 79 FR 4218 (January 24, 2014) (SR-FINRA-2014-
002). For proposed rule changes submitted with respect to NASDAQ
Last Sale, BX Last Sale, and PSX Last Sale, see, e.g., Securities
Exchange Act Release Nos. 57965 (June 16, 2008), 73 FR 35178, (June
20, 2008) (SR-NASDAQ-2006-060) (order approving NASDAQ Last Sale
data feeds pilot); 61112 (December 4, 2009), 74 FR 65569, (December
10, 2009) (SR-BX-2009-077) (notice of filing and immediate
effectiveness regarding BX Last Sale data feeds); and 62876
(September 9, 2010), 75 FR 56624, (September 16, 2010) (SR-Phlx-
2010-120) (notice of filing and immediate effectiveness regarding
PSX Last Sale data feeds).
\5\ Tape A and Tape B securities are disseminated pursuant to
the Security Industry Automation Corporation's (``SIAC'')
Consolidated Tape Association Plan/Consolidated Quotation System, or
CTA/CQS (``CTA''). Tape C securities are disseminated pursuant to
the NASDAQ Unlisted Trading Privileges (``UTP'') Plan.
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The text of the proposed rule change is available on the Exchange's
Web site at https://nasdaq.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.
[[Page 81585]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The purpose of this proposal is to amend Rule 7039(d).
Specifically, this proposal would allow NLS Plus to reflect
consolidated volume of real-time trading activity for Tape A securities
and Tape B securities. Now, consolidated volume on NLS Plus is real-
time only for Tape C securities. The Exchange also proposes to remove
two duplicative terms in the rule.
NLS Plus, which is reflected in Rule 7039(d),\6\ allows data
distributors to access last sale products offered by each of Nasdaq,
Inc.'s three equity exchanges. Thus, NLS Plus includes all transactions
from all of Nasdaq, Inc.'s equity markets, as well as FINRA/NASDAQ TRF
data that is included in the current NLS product. In addition, NLS Plus
features total cross-market volume information at the issue level,
thereby providing redistribution of consolidated volume information
from the securities information processors (``SIPs'') for Tape A, B,
and C securities, currently real-time for Tape C securities and 15-
minute delayed for Tape A and Tape B securities. Thus, NLS Plus covers
all securities listed on NASDAQ and New York Stock Exchange (``NYSE'')
(now under the Intercontinental Exchange (``ICE'') umbrella), as well
as US ``regional'' exchanges such as NYSE MKT, NYSE Arca, and BATS
(also known as BATS/Direct Edge).
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release Nos. 75257 (June 22,
2015), 80 FR 36862 (June 26, 2015)(SR-NASDAQ-2015-055) (order
approving proposed rule change regarding NASDAQ Last Sale Plus in
NASDAQ Rule 7039(d)) (the ``NLS Plus Approval Order''); 74972 (May
15, 2015), 80 FR 29370 (May 21, 2015)(SR-NASDAQ-2015-055) (notice of
filing of proposed rule change regarding NASDAQ Last Sale Plus) (the
``NLS Plus notice''); and 75660 (August 4, 2015), 80 FR 47968
(August 10, 2015) (SR-NASDAQ-2015-088) (notice of filing and
immediate effectiveness regarding NASDAQ Last Sale Plus fees).
Other exchanges have data feeds that are similar to NLS Plus.
See Securities Exchange Act Release Nos. 73918 (December 23, 2014),
79 FR 78920 (December 31, 2014) (SR-BATS-2014-055; SR-BYX-2014-030;
SR-EDGA-2014-25; SR-EDGX-2014-25) (order approving market data
product called BATS One Feed being offered by four affiliated
exchanges); and 74726 (April 14, 2015), 80 FR 21776 (April 20, 2015)
(SR-BATS-2015-29) (notice of filing and immediate effectiveness to
include consolidated volume in BATS One). See also Securities
Exchange Act Release No. 73553 (November 6, 2014), 79 FR 67491
(November 13, 2014) (SR-NYSE-2014-40) (order granting approval to
establish the NYSE Best Quote & Trades (``BQT'') Data Feed).
---------------------------------------------------------------------------
NLS Plus offers data for all U.S. equities via two separate data
channels: The first data channel reflects NASDAQ, BX, and PSX trades
with real-time consolidated volume for NASDAQ-listed securities; and
the second data channel reflects NASDAQ, BX, and PSX trades with
delayed consolidated volume for NYSE, NYSE MKT, NYSE Arca and BATS-
listed securities. The Exchange believes that market data distributors
may use the NLS Plus data feed to feed stock tickers, portfolio
trackers, trade alert programs, time and sale graphs, and other display
systems. The provision of multiple options for investors to receive
market data was a primary goal of the market data amendments adopted by
Regulation NMS. Finally, NLS Plus provides investors with options for
receiving market data that parallel products currently offered by BATS
and BATS Y, EDGA, and EDGX and NYSE equity exchanges.\7\
---------------------------------------------------------------------------
\7\ Id.
---------------------------------------------------------------------------
Consolidated volume reflects the consolidated volume at the time
that the NLS Plus trade message is generated, and includes the volume
for the issue symbol as reported on the consolidated market data feed.
The consolidated volume is based on the real-time trades reported via
the UTP Trade Data Feed (``UTDF'') and delayed trades reported via CTA.
NASDAQ calculates the real-time trading volume for its trading venues,
and then adds the real-time trading volume for the other (non-NASDAQ)
trading venues as reported via the UTDF data feed. For non-NASDAQ-
listed issues, the consolidated volume is based on trades reported via
SIAC's Consolidated Tape System (``CTS'') for the issue symbol. The
Exchange calculates the real-time trading volume for its trading
venues, and then adds the 15-minute delayed trading volume for the
other (non-NASDAQ) trading venues as reported via the CTS data feed.
NLS Plus is currently codified in NASDAQ Rule 7039(d) as follows:
(d) NASDAQ Last Sale Plus. NASDAQ Last Sale Plus is a
comprehensive data feed produced by NASDAQ OMX Information LLC. It
provides last sale data as well as consolidated volume of NASDAQ
U.S. equity markets (The NASDAQ Stock Market (``NASDAQ''), NASDAQ
OMX BX (``BX''), and NASDAQ OMX PSX (``PSX'')) and the NASDAQ/FINRA
Trade Reporting Facility (``TRF''). NASDAQ Last Sale Plus also
reflects cumulative volume real-time trading activity across all
U.S. exchanges for Tape C securities and 15-minute delayed
information for Tape A and Tape B securities. NASDAQ Last Sale Plus
also contains: Trade Price, Trade Size, Sale Condition Modifiers,
Cumulative Consolidated Market Volume, End of Day Trade Summary,
Adjusted Closing Price, IPO Information, and Bloomberg ID.
Additionally, pertinent regulatory information such as Market Wide
Circuit Breaker, Reg SHO Short Sale Price Test Restricted Indicator,
Trading Action, Symbol Directory, Adjusted Closing Price, and End of
Day Trade Summary are included. NLS Plus may be received by itself
or in combination with NASDAQ Basic.
This proposal essentially reflects one change to NLS Plus as it
currently exists. Whereas now consolidated volume on NLS Plus is real-
time only for Tape C securities and is 15 minute delayed for Tape A and
Tape B securities, this proposal would allow NLS Plus to reflect
consolidated volume of real-time trading activity as reported to all of
the Tapes. As proposed to be amended, NASDAQ Rule 7039(d)(1) [sic]
would state:
(d) NASDAQ Last Sale Plus. NASDAQ Last Sale Plus is a
comprehensive data feed produced by NASDAQ OMX Information LLC. It
provides last sale data as well as consolidated volume of NASDAQ
U.S. equity markets (The NASDAQ Stock Market (``NASDAQ''), NASDAQ
OMX BX (``BX''), and NASDAQ OMX PSX ``PSX'')) and the NASDAQ/FINRA
Trade Reporting Facility (``TRF''). NASDAQ Last Sale Plus also
reflects cumulative volume real-time trading activity across all
U.S. exchanges for Tape C securities. NASDAQ Last Sale Plus also
contains: Trade Price, Trade Size, Sale Condition Modifiers,
Cumulative Consolidated Market Volume, End of Day Trade Summary,
Adjusted Closing Price, IPO Information, and Bloomberg ID.
Additionally, pertinent regulatory information such as Market Wide
Circuit Breaker, Reg SHO Short Sale Price Test Restricted Indicator,
Trading Action, and Symbol Directory are included. NLS Plus may be
received by itself or in combination with NASDAQ Basic.
Additionally, NASDAQ Last Sale Plus reflects cumulative volume real-
time trading activity across all U.S. exchanges for Tape A
securities and Tape B securities.
Thus, with this proposal consolidated volume would reflect real-time
trading for all Tape A, Tape B, and Tape C securities. Market
participants have requested that the Exchange provide NLS Plus
consolidated volume that in fact reflects real-time trading for all
Tape A, Tape B, and Tape C securities. The Exchange believes that this
proposal would be of great benefit to market participants, who could
now get similar, real-time data across all U.S. markets that are
reported to Tapes A, B, and C. The Exchange believes that its proposal
allowing real-time volume on the NLS Plus feed is similar to the BATS
One feed, which transmits real-time data.\8\
---------------------------------------------------------------------------
\8\ See 73918 at 78921: ``[T]he BATS One Feed . . .
disseminates, on a real-time basis, the aggregate best bid and offer
. . . of all displayed orders for securities traded on the Exchanges
and for which the Exchanges report quotes under the Consolidated
Tape Association . . . Plan or the Nasdaq/UTP Plan.'' See also
https://cdn.batstrading.com/resources/release_notes/2015/SIP-Volume-in-BATS-One.pdf: ``The BATS One Feed provides affordable,
comprehensive and accurate real-time quote and trade data at a
fraction of the cost of competitive products. Retail brokers,
investment banks, media outlets and other firms will have an
opportunity to use the BATS One Feed to build displays that include
real-time SIP Consolidated Volume reflecting the total trading
volume occurring on all market centers for Tape A, B, and C listed
securities [footnote excluded].''
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[[Page 81586]]
The Exchange proposes one housekeeping change. This is a technical
change to remove two terms that are indicated twice in Rule 7039(d):
``Adjusted Closing Price'' and ``End of Day Trade Summary''.
With respect to latency, as discussed in previous NLS Plus
filings,\9\ the path for distribution of NLS Plus is not faster than
the path for distribution that would be used by a market data vendor to
distribute an independently created NLS Plus-like product. As such, the
NLS Plus data feed is a data product that a competing market data
vendor could create and sell without being in a disadvantaged position
relative to the Exchange. In recognition that the Exchange is the
source of its own market data and with being [sic] equity markets owned
by Nasdaq, Inc., the Exchange represents that the source of the market
data it would use to create proposed NLS Plus is available to other
vendors. In fact, the overwhelming majority of the data elements and
messages in NLS Plus are exactly the same as, and in fact are sourced
from, NLS, BX Last Sale, and PSX Last Sale, each of which is available
to other market data vendors. The will [sic] continue to make available
these individual underlying data elements, and thus, the source of the
market data that would be used to create the proposed NLS Plus is the
same as what is available to other market data vendors.\10\
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 75763 (August 26,
2015), 80 FR 52817 (September 1, 2015) (SR-Phlx-2015-72) (notice of
filing and immediate effectiveness).
\10\ In order to create NLS Plus, the system creating and
supporting NLS Plus receives the individual data feeds from each of
the Nasdaq, Inc. equity markets and, in turn, aggregates and
summarizes that data to create NLS Plus and then distribute it to
end users. This is the same process that a competing market data
vendor would undergo should it want to create a market data product
similar to NLS Plus to distribute to its end users. A competing
market data vendor could receive the individual data feeds from each
of the Nasdaq, Inc. equity markets at the same time the system
creating and supporting NLS Plus would for it to create NLS Plus.
Therefore, a competing market data vendor could, as discussed,
obtain the underlying data elements from the Nasdaq, Inc. equity
markets on the same latency basis as the system that would be
performing the aggregation and consolidation of proposed NLS Plus,
and provide a similar product to its customers with the same latency
they could achieve by purchasing NLS Plus from the Exchange. As
such, the Exchange would not have any unfair advantage over
competing market data vendors with respect to NLS Plus. Moreover, in
terms of NLS itself, the Exchange would access the underlying feed
from the same point as would a market data vendor; as discussed, the
Exchange would not have a speed advantage.
---------------------------------------------------------------------------
The Exchange believes that its proposal would greatly benefit the
public and investors, and is consistent with the Act.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\11\ in general, and with
Section 6(b)(5) of the Act,\12\ in particular, in that the proposal is
designed to prevent fraudulent and manipulative acts and practices, to
promote just and equitable principles of trade, to foster cooperation
and coordination with persons engaged in regulating, clearing,
settling, processing information with respect to, and facilitating
transactions in securities, 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.
---------------------------------------------------------------------------
\11\ 15 U.S.C. 78f.
\12\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The purpose of the proposed rule change is to add language to
section (d) of Rule 7039 regarding real-time data across all U.S.
markets that are reported to Tapes A, B, and C and are offered on NLS
Plus; and to remove two duplicative terms from the rule. The Exchange
believes that the proposal facilitates transactions in securities,
removes impediments to and perfects the mechanism of a free and open
market and a national market system, and, in general, protects
investors and the public interest by making available additional means
by which investors may access real-time volume information about
securities transactions, thereby providing investors with additional
options for accessing information that may help to inform their trading
decisions.
The Exchange notes that the Commission has recently approved a data
product on several exchanges that is similar to NLS Plus and is real-
time, and specifically determined that the approved data product was
consistent with the Act.\13\ NLS Plus simply provides market
participants with an additional option for receiving real-time market
data that has already been the subject of a proposed rule change and
that is available from myriad market data vendors.
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\13\ See Securities Exchange Act Release Nos. 73918 (December
23, 2014), 79 FR 78920 (December 31, 2014) (SR-BATS-2014-055; SR-
BYX-2014-030; SR-EDGA-2014-25; SR-EDGX-2014-25); and 74726 (April
14, 2015), 80 FR 21776 (April 20, 2015) (SR-BATS-2015-29) (notice of
filing and immediate effectiveness to include consolidated volume in
BATS One).
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In adopting Regulation NMS, the Commission granted SROs and broker-
dealers (``BDs'') 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. The
Exchange believes that its NLS Plus market data product is precisely
the sort of market data product that the Commission envisioned when it
adopted Regulation NMS. The Commission concluded that Regulation NMS--
by deregulating the market in proprietary data--would itself further
the Act's goals of facilitating efficiency and competition:
[E]fficiency is promoted when broker-dealers who do not need the
data beyond the prices, sizes, market center identifications of the
NBBO and consolidated last sale information are not required to receive
(and pay for) such data. The Commission also believes that efficiency
is promoted when broker-dealers may choose to receive (and pay for)
additional market data based on their own internal analysis of the need
for such data.\14\
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\14\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005).
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By removing unnecessary regulatory restrictions on the ability of
exchanges to sell their own data, Regulation NMS advanced the goals of
the Act and the principles reflected in its legislative history. If the
free market should determine whether proprietary data is sold to BDs at
all, it follows that the price at which such data is sold should be set
by the market as well. Moreover, data products such as NLS Plus are a
means by which exchanges compete to attract order flow. To the extent
that exchanges are successful in such competition, they earn trading
revenues and also enhance the value of their data products by
increasing the amount of data they are able to provide. Conversely, to
the extent that exchanges are unsuccessful, the inputs needed to add
value to data products are diminished. Accordingly, the need to compete
for order flow places substantial pressure upon exchanges to keep their
fees for both executions and data reasonable.
The Exchange believes that, for the reasons given, the proposal is
consistent with the Act.
[[Page 81587]]
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. As
is true of all NASDAQ's non-core data products, NASDAQ's ability to
offer NLS Plus through NASDAQ OMX Information LLC and price NLS Plus is
constrained by: (1) Competition between exchanges and other trading
platforms that compete with each other in a variety of dimensions; (2)
the existence of inexpensive real-time consolidated data and market-
specific data and free delayed consolidated data; and (3) the inherent
contestability of the market for proprietary last sale data. The
Exchange believes that its proposal is pro-competitive in that it will
allow the Exchange to distribute consolidated volume for Tapes A, B,
and C on a real-time basis, similarly to a data product on several
exchanges that is similar to NLS Plus. The Exchange believes that this
would be of great benefit to market participants, who could now get
similar, real-time data across all U.S. markets that are reported to
Tapes A, B, and C.
In addition, as discussed, NLS Plus competes directly with a myriad
of similar products and potential products of market data vendors. This
proposal allows offering on NLS Plus, on a real-time basis, U.S. market
data that is reported to Tapes A, B, and C. NLS Plus joins the existing
market for proprietary last sale data products that is currently
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, as well as other entities, in a vigorously
competitive market. Similarly, with respect to the FINRA/NASDAQ TRF
data that is a component of NLS and NLS Plus, allowing exchanges to
operate TRFs has permitted them to earn revenues by providing
technology and data in support of the non-exchange segment of the
market. This revenue opportunity has also resulted in fierce
competition between the two current TRF operators, with both TRFs
charging extremely low trade reporting fees and rebating the majority
of the revenues they receive from core market data to the parties
reporting trades.
The costs of producing market data include not only the costs of
the data distribution infrastructure, but also the costs of designing,
maintaining, and operating the exchange's transaction execution
platform and the cost of regulating the exchange to ensure its fair
operation and maintain investor confidence. The total return that a
trading platform earns reflects the revenues it receives from both
products and the joint costs it incurs. Moreover, the operation of the
exchange is characterized by high fixed costs and low marginal costs.
This cost structure is common in content and content distribution
industries such as software, where developing new software typically
requires a large initial investment (and continuing large investments
to upgrade the software), but once the software is developed, the
incremental cost of providing that software to an additional user is
typically small, or even zero (e.g., if the software can be downloaded
over the internet after being purchased).\15\ In NASDAQ's case, it is
costly to build and maintain a trading platform, but the incremental
cost of trading each additional share on an existing platform, or
distributing an additional instance of data, is very low. Market
information and executions are each produced jointly (in the sense that
the activities of trading and placing orders are the source of the
information that is distributed) and are each subject to significant
scale economies. In such cases, marginal cost pricing is not feasible
because if all sales were priced at the margin, NASDAQ would be unable
to defray its platform costs of providing the joint products.
Similarly, data products cannot make use of TRF trade reports without
the raw material of the trade reports themselves, and therefore
necessitate the costs of operating, regulating,\16\ and maintaining a
trade reporting system, costs that must be covered through the fees
charged for use of the facility and sales of associated data.
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\15\ See William J. Baumol and Daniel G. Swanson, ``The New
Economy and Ubiquitous Competitive Price Discrimination: Identifying
Defensible Criteria of Market Power,'' Antitrust Law Journal, Vol.
70, No. 3 (2003).
\16\ It should be noted that the costs of operating the FINRA/
NASDAQ TRF borne by NASDAQ include regulatory charges paid by NASDAQ
to FINRA.
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Competition among trading platforms can be expected to constrain
the aggregate return each platform earns from the sale of its joint
products, but different platforms may choose from a range of possible,
and equally reasonable, pricing strategies as the means of recovering
total costs. NASDAQ pays rebates to attract orders, charges relatively
low prices for market information and charges relatively high prices
for accessing posted liquidity. Other platforms may choose a strategy
of paying lower liquidity rebates to attract orders, setting relatively
low prices for accessing posted liquidity, and setting relatively high
prices for market information. Still others may provide most data free
of charge and rely exclusively on transaction fees to recover their
costs. Finally, some platforms may incentivize use by providing
opportunities for equity ownership, which may allow them to charge
lower direct fees for executions and data.
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. Such regulation is unnecessary because an ``excessive'' price
for one of the joint products will ultimately have to be reflected in
lower prices for other products sold by the firm, or otherwise the firm
will experience a loss in the volume of its sales that will be adverse
to its overall profitability. In other words, an increase in the price
of data will ultimately have to be accompanied by a decrease in the
cost of executions, or the volume of both data and executions will
fall.
The competitive nature of the market for products such as NLS Plus
is borne out by the performance of the market. In May 2008, the
Internet portal Yahoo! began offering its Web site viewers real-time
last sale data (as well as best quote data) provided by BATS. In
response, in June 2008, NASDAQ launched NLS, which was initially
subject to an ``enterprise cap'' of $100,000 for customers receiving
only one of the NLS products, and $150,000 for customers receiving both
products. The majority of NASDAQ's sales were at the capped level. In
early 2009, BATS expanded its offering of free data to include depth-
of-book data. Also in early 2009, NYSE Arca announced the launch of a
competitive last sale product with an enterprise price of $30,000 per
month. In response, NASDAQ combined the enterprise cap for the NLS
products and reduced the cap to $50,000 (i.e., a reduction of $100,000
per month). Although each of these products offers only a specific
subset of data available from the SIPs, NASDAQ believes that the
products are viewed as substitutes for each other and for core last-
sale data, rather than as products that must be
[[Page 81588]]
obtained in tandem. For example, while Yahoo! and Google now both
disseminate NASDAQ's product, several other major content providers,
including MSN and Morningstar, use the BATS product. Moreover, further
evidence of competition can be observed in the recently-developed BATS
One Feed and BQT feed.\17\
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\17\ See supra note 6.
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In this environment, 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'.'' NetCoalition I at 539. The existence of
fierce competition for order flow implies a high degree of price
sensitivity on the part of BDs with order flow, since they may readily
reduce costs by directing orders toward the lowest-cost trading venues.
A BD 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. If a platform increases its market
data fees, the change will affect the overall cost of doing business
with the platform, and affected BDs will assess whether they can lower
their trading costs by directing orders elsewhere and thereby lessening
the need for the more expensive data. Similarly, increases in the cost
of NLS Plus would impair the willingness of distributors to take a
product for which there are numerous alternatives, impacting NLS Plus
data revenues, the value of NLS Plus as a tool for attracting order
flow, and ultimately, the volume of orders routed to NASDAQ and the
value of its other data products.
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
Because the foregoing 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 for 30 days from the date on which it was filed, or
such shorter time as the Commission may designate, it has become
effective pursuant to Section 19(b)(3)(A) of the Act \18\ and Rule 19b-
4(f)(6) thereunder.\19\
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\18\ 15 U.S.C. 78s(b)(3)(A).
\19\ 17 CFR 240.19b-4(f)(6). As required under Rule 19b-
4(f)(6)(iii), the Exchange provided the Commission with written
notice of its intent to file the proposed rule change, along with a
brief description and the 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.
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A proposed rule change filed pursuant to Rule 19b-4(f)(6) under the
Act \20\ normally does not become operative for 30 days after the date
of its filing. However, Rule 19b-4(f)(6)(iii) \21\ permits the
Commission to designate a shorter time if such action is consistent
with the protection of investors and the public interest. The Exchange
has asked the Commission to waive the 30-day operative delay so that
the NLS Plus may as soon as possible offer real-time data across all
U.S. markets that are reported to Tapes A, B, and C, in a manner
similar to other markets.\22\ The Commission believes that waiving the
30-day operative delay is consistent with the protection of investors
and the public interest. Therefore, the Commission hereby waives the
operative delay and designates the proposed rule change operative upon
filing.\23\
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\20\ 17 CFR 240.19b-4(f)(6).
\21\ 17 CFR 240.19b-4(f)(6)(iii).
\22\ See Securities Exchange Act Release Nos. 73918 (December
23, 2014), 79 FR 78920 (December 31, 2014) (SR-BATS-2014-055; SR-
BYX-2014-030; SR-EDGA-2014-25; SR-EDGX-2014-25); and 74726 (April
14, 2015), 80 FR 21776 (April 20, 2015) (SR-BATS-2015-29).
\23\ For purposes only of waiving the 30-day operative delay,
the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
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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. 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-NASDAQ-2015-150 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 Number SR-NASDAQ-2015-150. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml). Copies of the submission, all subsequent amendments, all
written statements with respect to the proposed rule change that are
filed with the Commission, and all written communications relating to
the proposed rule change between the Commission and any person, other
than those that may be withheld from the public in accordance with the
provisions of 5 U.S.C. 552, will be available for Web site viewing and
printing in the Commission's Public Reference Room, 100 F Street NE.,
Washington, DC 20549, on official business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the filing also will be available
for inspection and copying at the principal office of the Exchange. All
comments received will be posted without change; the Commission does
not edit personal identifying information from submissions. You should
submit only information that you wish to make available publicly. All
submissions should refer to File Number SR-NASDAQ-2015-150 and should
be submitted on or before January 20, 2016.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\24\
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\24\ 17 CFR 200.30-3(a)(12).
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Brent J. Fields,
Secretary.
[FR Doc. 2015-32896 Filed 12-29-15; 8:45 am]
BILLING CODE 8011-01-P
