Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of BATS Y-Exchange, Inc., 81581-81584 [2015-32898]

Download as PDF Federal Register / Vol. 80, No. 250 / Wednesday, December 30, 2015 / Notices 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–Phlx–2015–110. 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–Phlx– 2015–110 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. 2015–32897 Filed 12–29–15; 8:45 am] [Release No. 34–76774; File No. SR–BYX– 2015–51] Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for Use of BATS Y-Exchange, Inc. December 24, 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 December 22, 2015, BATS Y-Exchange, Inc. (the ‘‘Exchange’’ or ‘‘BYX’’) filed with the Securities and Exchange Commission (‘‘Commission’’) the proposed rule change as described in Items I, II and III below, which Items have been prepared by the Exchange. The Exchange has designated the proposed rule change as one establishing or changing a member due, fee, or other charge imposed by the Exchange under Section 19(b)(3)(A)(ii) of the Act 3 and Rule 19b–4(f)(2) thereunder,4 which renders the proposed rule change effective upon filing with the Commission. The Commission is publishing this notice to solicit comments on the proposed rule change from interested persons. I. Self-Regulatory Organization’s Statement of the Terms of Substance of the Proposed Rule Change The Exchange filed a proposal to amend the Market Data section of its fee schedule to: (i) Adopt definitions for the terms ‘‘Non-Display Usage’’ and ‘‘Trading Platforms’’; and (ii) amend the fees for TCP Depth and Multicast Depth data products,5 also known as BZX Depth [sic], to increase the Internal Distributor fee and adopt a new fee for Non-Display Usage. The text of the proposed rule change is available at the Exchange’s Web site at www.batstrading.com, at the principal office of the Exchange, and at the Commission’s Public Reference Room. II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change BILLING CODE 8011–01–P mstockstill on DSK4VPTVN1PROD with NOTICES SECURITIES AND EXCHANGE COMMISSION In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed 1 15 U.S.C. 78s(b)(1). CFR 240.19b–4. 3 15 U.S.C. 78s(b)(3)(A)(ii). 4 17 CFR 240.19b–4(f)(2). 5 See Exchange Rule 11.22(a) and (c). 2 17 24 17 CFR 200.30–3(a)(12). VerDate Sep<11>2014 17:59 Dec 29, 2015 Jkt 238001 PO 00000 Frm 00075 Fmt 4703 Sfmt 4703 81581 any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in Sections A, B, and C below, of the most significant parts of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The Exchange proposes to amend the Market Data section of its fee schedule to: (i) Adopt definitions for the terms ‘‘Non-Display Usage’’ and ‘‘Trading Platforms’’; and (ii) amend the fees for BYX Depth to increase the Internal Distributor fee and adopt a new fee for Non-Display Usage. Definitions The Exchange proposes to adopt definitions for the terms ‘‘Non-Display Usage’’ and ‘‘Trading Platforms’’. The proposed definitions are designed to provide greater transparency with regard to how the Exchange assesses fees for market data. Non-Display Usage would be defined as ‘‘any method of accessing a Market Data product that involves access or use by a machine or automated device without access or use of a display by a natural person or persons.’’ 6 The term Trading Platform would be defined as ‘‘any execution platform operated as or by a registered National Securities Exchange (as defined in Section 3(a)(1) of the Exchange Act), an Alternative Trading System (as defined in Rule 300(a) of Regulation ATS), or an Electronic Communications Network (as defined in Rule 600(b)(23) of Regulation NMS).’’ 7 BYX Depth Fees BYX Depth is an uncompressed market data feed that provides depth-ofbook quotations and execution information based on equity orders entered into the System.8 Internal Distributor Fee. Currently, the Exchange charges fees for both internal and external distribution of BYX Depth. The cost of BYX Depth for 6 The proposed definition of Non-Display Usage is substantially similar to Nasdaq Stock Market LLC (‘‘Nasdaq’’) Rule 7023(a)(2)(B), which defines NonDisplay Usage as ‘‘any method of accessing Depthof-Book data that involves access or use by a machine or automated device without access or use of a display by a natural person or persons. 7 The proposed definition of Trading Platform is identical the definition of Trading Platform under Nasdaq Rule 7023(a)(7). 8 See Exchange Rule 11.22(a) and (c). E:\FR\FM\30DEN1.SGM 30DEN1 81582 Federal Register / Vol. 80, No. 250 / Wednesday, December 30, 2015 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES an Internal Distributor 9 is currently $500 per month. The Exchange also separately charges an External Distributor 10 of BYX Depth a flat fee of $2,500 per month. The Exchange does not charge Internal and External Distributors separate display User 11 fees. The Exchange now proposes to increase the fee for Internal Distributors from $500 per month to $1,000 per month. The Exchange does not proposes to amend its fees for External Distributors. Non-Display Usage Fee. The Exchange also proposes to adopt a new fee for Non-Display Usage by Trading Platforms, which is similar to fees currently being charged by Nasdaq and the New York Stock Exchange, Inc. (‘‘NYSE’’).12 As proposed, subscribers to BYX Depth would pay a fee of $2,000 per month for Non-Display Usage of BYX Depth by its Trading Platforms. Trading Platforms, as defined above, include registered National Securities Exchanges, Alternative Trading Systems (‘‘ATSs’’), and Electronic Communications Networks (‘‘ECNs’’) as those terms are defined in the Exchange Act and regulations and rules thereunder. The fee would be assessed in addition to existing Distributor fees. The fee of $2,000 per month would represent the maximum charge per subscriber regardless of the number of Trading Platforms the subscriber operates and receive the data for NonDisplay Usage. For example, if a subscriber operates three Trading Platforms that receives BYX Depth for Non-Displayed Usage, that subscriber would continue to pay a total fee of $2,000 per month, rather than paying $6,000 per month for its three Trading Platforms ($2,000 for each Trading Platform). 9 An ‘‘Internal Distributor’’ is defined as ‘‘a Distributor that receives the Exchange Market Data product and then distributes that data to one or more Users within the Distributor’s own entity.’’ See the Exchange Fee Schedule available at https://batstrading.com/support/fee_schedule/byx/. A ‘‘Distributor’’ is defined as ‘‘any entity that receives the Exchange Market Data product directly from the Exchange or indirectly through another entity and then distributes it internally or externally to a third party.’’ Id. 10 An ‘‘External Distributor’’ is defined as ‘‘a Distributor that receives the Exchange Market Data product and then distributes that data to a third party or one or more Users outside the Distributor’s own entity.’’ Id. 11 A ‘‘User’’ is defined as ‘‘a natural person, a proprietorship, corporation, partnership, or entity, or device (computer or other automated service), that is entitled to receive Exchange data.’’ Id. 12 See Nasdaq Rule 7023(d) (setting forth a Trading Platform Fee of $5,000 per trading platform up to a maximum of three trading platforms for depth-of-book data). See also NYSE Market Data Fees, November 2015 (providing a monthly fee for non-display usage of $5,000 for NYSE OpenBook). VerDate Sep<11>2014 17:59 Dec 29, 2015 Jkt 238001 Implementation Date The Exchange proposes to implement the proposed changes to its fee schedule on January 4, 2016. 2. Statutory Basis The Exchange believes that the proposed rule change is consistent with the objectives of Section 6 of the Act,13 in general, and furthers the objectives of Section 6(b)(4),14 in particular, as it is designed to provide for the equitable allocation of reasonable dues, fees and other charges among its members and other recipients of Exchange data. The Exchange believes that the proposed rates are equitable and nondiscriminatory in that they apply uniformly to all recipients of Exchange data. The Exchange believes the proposed fees are competitive with those charged by other venues and, therefore, reasonable and equitably allocated to recipients. Lastly, the Exchange also believes that the proposed fees are reasonable and nondiscriminatory because they will apply uniformly to all recipients of Exchange data. The Exchange also believes that the proposed rule change is consistent with Section 11(A) of the Act 15 in that it supports (i) fair competition among brokers and dealers, among exchange markets, and between exchange markets and markets other than exchange markets and (ii) the availability to brokers, dealers, and investors of information with respect to quotations for and transactions in securities. Furthermore, the proposed rule change is consistent with Rule 603 of Regulation NMS,16 which provides that any national securities exchange that distributes information with respect to quotations for or transactions in an NMS stock do so on terms that are not unreasonably discriminatory. In adopting Regulation NMS, the Commission granted self-regulatory organizations and broker-dealers increased authority and flexibility to offer new and unique market data to the public. It was believed that this authority would expand the amount of data available to consumers, and also spur innovation and competition for the provision of market data. In addition, the proposed fees would not permit unfair discrimination because all of the Exchange’s subscribers will be subject to the proposed fees on an equivalent basis. BYX Depth is distributed and purchased 13 15 U.S.C. 78f. U.S.C. 78f(b)(4). 15 U.S.C. 78k–1. 16 See 17 CFR 242.603. 14 15 PO 00000 Frm 00076 Fmt 4703 Sfmt 4703 on a voluntary basis, in that neither the Exchange nor market data distributors are required by any rule or regulation to make this data available. Accordingly, Distributors and Users can discontinue use at any time and for any reason, including due to an assessment of the reasonableness of fees charged. Firms have a wide variety of alternative market data products from which to choose, such as similar proprietary data products offered by other exchanges and consolidated data. Moreover, the Exchange is not required to make any proprietary data products available or to offer any specific pricing alternatives to any customers. In addition, the fees that are the subject of this rule filing are constrained by competition. As explained below in the Exchange’s Statement on Burden on Competition, the existence of alternatives to BYX Depth further ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when subscribers can elect such alternatives. That is, the Exchange competes with other exchanges (and their affiliates) that provide similar market data products. If another exchange (or its affiliate) were to charge less to consolidate and distribute its similar product than the Exchange charges to consolidate and distribute BYX Depth, prospective Users likely would not subscribe to, or would cease subscribing to, BYX Depth. The Exchange notes that the Commission is not required to undertake a cost-of-service or ratemaking approach. The Exchange believes that, even if it were possible as a matter of economic theory, cost-based pricing for non-core market data would be so complicated that it could not be done practically.17 17 The Exchange believes that cost-based pricing would be impractical because it would create enormous administrative burdens for all parties, including the Commission, to cost-regulate a large number of participants and standardize and analyze extraordinary amounts of information, accounts, and reports. In addition, it is impossible to regulate market data prices in isolation from prices charged by markets for other services that are joint products. Cost-based rate regulation would also lead to litigation and may distort incentives, including those to minimize costs and to innovate, leading to further waste. Under cost-based pricing, the Commission would be burdened with determining a fair rate of return, and the industry could experience frequent rate increases based on escalating expense levels. Even in industries historically subject to utility regulation, cost-based ratemaking has been discredited. As such, the Exchange believes that cost-based ratemaking would be inappropriate for proprietary market data and inconsistent with Congress’s direction that the Commission use its authority to foster the development of the national market system, and that market forces will continue to provide appropriate pricing discipline. See Appendix C to E:\FR\FM\30DEN1.SGM 30DEN1 Federal Register / Vol. 80, No. 250 / Wednesday, December 30, 2015 / Notices mstockstill on DSK4VPTVN1PROD with NOTICES The proposed amendment to the Internal Distributor fee for BYX Depth is also equitable and reasonable as, despite the increase, the fee proposed continues to be less than similar fees currently charged by Nasdaq and NYSE for their depth-of-book data products.18 In addition, the proposed Non-Display Usage fee by Trading Platforms for BYX Depth is equitable and reasonable as the fees proposed is less than similar fees currently charged by Nasdaq for its depth-of-book data. In addition, unlike the Exchange, a subscriber utilizing Nasdaq depth-of-book data on more than one Trading Platform would pay $5,000 per month for each up to a maximum fee of $15,000. The Exchange proposes to charge the same rate regardless of the number of Trading Platforms receiving the data for NonDisplay Usage operated by that subscriber. The Trading Platform fee is also equitable and reasonable in that it ensures that heavy users of the BYX Depth pay an equitable share of the total fees. Currently, External Distributors pay higher fees than Internal Distributors based upon their assumed higher usage levels. The Exchange believes that Trading Platforms are generally high users of the data, using it to power a matching engine for millions or even billions of trading messages per day. Lastly, the Exchange believes that the proposed definitions are reasonable because they are designed to provide greater transparency to Members with regard to how the Exchange would assess the proposed fee for Non-Display Usage of BYX Depth by Trading Platforms. The Exchange believes that Members would benefit from clear guidance in its fee schedule describing the manner in which is assess fees. These definitions are intended to make the fee schedule clearer and less confusing for investors and eliminate potential investor confusion, thereby removing impediments to and perfecting the mechanism of a free and open market and a national market NYSE’s comments to the Commission’s 2000 Concept Release on the Regulation of Market Information Fees and Revenues, which can be found on the Commission’s Web site at https:// www.sec.gov/rules/concept/s72899/buck1.htm. See also Securities Exchange Act Release No. 73816 (December 11, 2014), 79 FR 75200 (December 17, 2014) (SR–NYSE–2014–64) (Notice of Filing and Immediate Effectiveness of Proposed Rule Change to Establish an Access Fee for the NYSE Best Quote and Trades Data Feed, Operative December 1, 2014). 18 See Nasdaq Rule 7023(c) (providing for fees of $25,000 to $500,000 to internal distributors of Nasdaq Depth-of-Book products). See also NYSE Market Data Fees, November 2015 (providing a $5,000 per month access fee for NYSE OpenBook). VerDate Sep<11>2014 17:59 Dec 29, 2015 Jkt 238001 system, and, in general, protecting investors and the public interest. Lastly, the proposed definitions are based on existing rules of Nasdaq.19 B. Self-Regulatory Organization’s Statement on Burden on Competition The Exchange does not believe that the proposed rule change will result in any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act, as amended. The Exchange’s ability to price BYX Depth is constrained by: (i) Competition among exchanges, other trading platforms, and Trade Reporting Facilities (‘‘TRF’’) that compete with each other in a variety of dimensions; (ii) the existence of inexpensive realtime consolidated data and marketspecific data and free delayed data; and (iii) the inherent contestability of the market for proprietary data. The Exchange and its market data products are subject to significant competitive forces and the proposed fees represent responses to that competition. To start, the Exchange competes intensely for order flow. It competes with the other national securities exchanges that currently trade equities, with electronic communication networks, with quotes posted in FINRA’s Alternative Display Facility, with alternative trading systems, and with securities firms that primarily trade as principal with their customer order flow. In addition, BYX Depth competes with a number of alternative products. For instance, BYX Depth does not provide a complete picture of all trading activity in a security. Rather, the other national securities exchanges, the several TRFs of FINRA, and ECNs that produce proprietary data all produce trades and trade reports. Each is currently permitted to produce depthof-book information products, and many currently do, including Nasdaq and NYSE. In sum, the availability of a variety of alternative sources of information imposes significant competitive pressures on Exchange data products and the Exchange’s compelling need to attract order flow imposes significant competitive pressure on the Exchange to act equitably, fairly, and reasonably in setting the proposed data product fees. The proposed data product fees are, in part, responses to that pressure. The Exchange believes that the proposed fees would reflect an equitable allocation of its overall costs to users of its facilities. In addition, when establishing the proposed fees, the Exchange considered the competitiveness of the market for proprietary data and all of the implications of that competition. The Exchange believes that it has considered all relevant factors and has not considered irrelevant factors in order to establish fair, reasonable, and not unreasonably discriminatory fees and an equitable allocation of fees among all Users. The existence of alternatives to BYX Depth, including existing similar feeds by other exchanges, consolidated data, and proprietary data from other sources, ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when subscribers can elect these alternatives or choose not to purchase a specific proprietary data product if its cost to purchase is not justified by the returns any particular vendor or subscriber would achieve through the purchase. The Exchange believes the proposed increase to the Internal Distributor fee and adoption of the fee for Non-Display Usage by Trading Platforms for BYX Depth would increase competition amongst the exchanges that offer depthof-book products. The Exchange notes that, despite the proposed increase, the Internal Distribution fee for BYX Depth continues to be less than similar fees currently charged by Nasdaq and NYSE for its depth-of-book data.20 In addition, the proposed Non-Display Usage fee by Trading Platforms is less than similar fees currently charged by Nasdaq for its Depth-of-Book data.21 Lastly, the proposed definitions will not result in any burden on competition. The Exchange believes that Members would benefit from clear guidance in its fee schedule describing the manner in which is assess fees. These definitions are intended to make the fee schedule clearer and less confusing for investors and are not designed to have a competitive impact. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange has neither solicited nor received written comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) 20 See 19 Nasdaq PO 00000 Rules 7023(a)(2)(B) and (a)(7). Frm 00077 Fmt 4703 Sfmt 4703 81583 21 See E:\FR\FM\30DEN1.SGM supra note 18. supra note 19. 30DEN1 81584 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: mstockstill on DSK4VPTVN1PROD with NOTICES 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). VerDate Sep<11>2014 17:59 Dec 29, 2015 Jkt 238001 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 PO 00000 Frm 00078 Fmt 4703 Sfmt 4703 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. E:\FR\FM\30DEN1.SGM 30DEN1

Agencies

[Federal Register Volume 80, Number 250 (Wednesday, December 30, 2015)]
[Notices]
[Pages 81581-81584]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2015-32898]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76774; File No. SR-BYX-2015-51]


Self-Regulatory Organizations; BATS Y-Exchange, Inc.; Notice of 
Filing and Immediate Effectiveness of a Proposed Rule Change Related to 
Fees for Use of BATS Y-Exchange, Inc.

December 24, 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 December 22, 2015, BATS Y-Exchange, Inc. (the ``Exchange'' or 
``BYX'') filed with the Securities and Exchange Commission 
(``Commission'') the proposed rule change as described in Items I, II 
and III below, which Items have been prepared by the Exchange. The 
Exchange has designated the proposed rule change as one establishing or 
changing a member due, fee, or other charge imposed by the Exchange 
under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-4(f)(2) 
thereunder,\4\ which renders the proposed rule change effective upon 
filing with the Commission. The Commission is publishing this notice to 
solicit comments on the proposed rule change from interested persons.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ 15 U.S.C. 78s(b)(3)(A)(ii).
    \4\ 17 CFR 240.19b-4(f)(2).
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I. Self-Regulatory Organization's Statement of the Terms of Substance 
of the Proposed Rule Change

    The Exchange filed a proposal to amend the Market Data section of 
its fee schedule to: (i) Adopt definitions for the terms ``Non-Display 
Usage'' and ``Trading Platforms''; and (ii) amend the fees for TCP 
Depth and Multicast Depth data products,\5\ also known as BZX Depth 
[sic], to increase the Internal Distributor fee and adopt a new fee for 
Non-Display Usage.
---------------------------------------------------------------------------

    \5\ See Exchange Rule 11.22(a) and (c).
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    The text of the proposed rule change is available at the Exchange's 
Web site at www.batstrading.com, at the principal office of the 
Exchange, and at the Commission's Public Reference Room.

II. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

    In its filing with the Commission, the Exchange included statements 
concerning the purpose of and basis for the proposed rule change and 
discussed any comments it received on the proposed rule change. The 
text of these statements may be examined at the places specified in 
Item IV below. The Exchange has prepared summaries, set forth in 
Sections A, B, and C below, of the most significant parts of such 
statements.

A. Self-Regulatory Organization's Statement of the Purpose of, and 
Statutory Basis for, the Proposed Rule Change

1. Purpose
    The Exchange proposes to amend the Market Data section of its fee 
schedule to: (i) Adopt definitions for the terms ``Non-Display Usage'' 
and ``Trading Platforms''; and (ii) amend the fees for BYX Depth to 
increase the Internal Distributor fee and adopt a new fee for Non-
Display Usage.
Definitions
    The Exchange proposes to adopt definitions for the terms ``Non-
Display Usage'' and ``Trading Platforms''. The proposed definitions are 
designed to provide greater transparency with regard to how the 
Exchange assesses fees for market data. Non-Display Usage would be 
defined as ``any method of accessing a Market Data product that 
involves access or use by a machine or automated device without access 
or use of a display by a natural person or persons.'' \6\ The term 
Trading Platform would be defined as ``any execution platform operated 
as or by a registered National Securities Exchange (as defined in 
Section 3(a)(1) of the Exchange Act), an Alternative Trading System (as 
defined in Rule 300(a) of Regulation ATS), or an Electronic 
Communications Network (as defined in Rule 600(b)(23) of Regulation 
NMS).'' \7\
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    \6\ The proposed definition of Non-Display Usage is 
substantially similar to Nasdaq Stock Market LLC (``Nasdaq'') Rule 
7023(a)(2)(B), which defines Non-Display Usage as ``any method of 
accessing Depth-of-Book data that involves access or use by a 
machine or automated device without access or use of a display by a 
natural person or persons.
    \7\ The proposed definition of Trading Platform is identical the 
definition of Trading Platform under Nasdaq Rule 7023(a)(7).
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BYX Depth Fees
    BYX Depth is an uncompressed market data feed that provides depth-
of-book quotations and execution information based on equity orders 
entered into the System.\8\
---------------------------------------------------------------------------

    \8\ See Exchange Rule 11.22(a) and (c).
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    Internal Distributor Fee. Currently, the Exchange charges fees for 
both internal and external distribution of BYX Depth. The cost of BYX 
Depth for

[[Page 81582]]

an Internal Distributor \9\ is currently $500 per month. The Exchange 
also separately charges an External Distributor \10\ of BYX Depth a 
flat fee of $2,500 per month. The Exchange does not charge Internal and 
External Distributors separate display User \11\ fees. The Exchange now 
proposes to increase the fee for Internal Distributors from $500 per 
month to $1,000 per month. The Exchange does not proposes to amend its 
fees for External Distributors.
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    \9\ An ``Internal Distributor'' is defined as ``a Distributor 
that receives the Exchange Market Data product and then distributes 
that data to one or more Users within the Distributor's own 
entity.'' See the Exchange Fee Schedule available at https://batstrading.com/support/fee_schedule/byx/. A ``Distributor'' is 
defined as ``any entity that receives the Exchange Market Data 
product directly from the Exchange or indirectly through another 
entity and then distributes it internally or externally to a third 
party.'' Id.
    \10\ An ``External Distributor'' is defined as ``a Distributor 
that receives the Exchange Market Data product and then distributes 
that data to a third party or one or more Users outside the 
Distributor's own entity.'' Id.
    \11\ A ``User'' is defined as ``a natural person, a 
proprietorship, corporation, partnership, or entity, or device 
(computer or other automated service), that is entitled to receive 
Exchange data.'' Id.
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    Non-Display Usage Fee. The Exchange also proposes to adopt a new 
fee for Non-Display Usage by Trading Platforms, which is similar to 
fees currently being charged by Nasdaq and the New York Stock Exchange, 
Inc. (``NYSE'').\12\ As proposed, subscribers to BYX Depth would pay a 
fee of $2,000 per month for Non-Display Usage of BYX Depth by its 
Trading Platforms. Trading Platforms, as defined above, include 
registered National Securities Exchanges, Alternative Trading Systems 
(``ATSs''), and Electronic Communications Networks (``ECNs'') as those 
terms are defined in the Exchange Act and regulations and rules 
thereunder. The fee would be assessed in addition to existing 
Distributor fees. The fee of $2,000 per month would represent the 
maximum charge per subscriber regardless of the number of Trading 
Platforms the subscriber operates and receive the data for Non-Display 
Usage. For example, if a subscriber operates three Trading Platforms 
that receives BYX Depth for Non-Displayed Usage, that subscriber would 
continue to pay a total fee of $2,000 per month, rather than paying 
$6,000 per month for its three Trading Platforms ($2,000 for each 
Trading Platform).
---------------------------------------------------------------------------

    \12\ See Nasdaq Rule 7023(d) (setting forth a Trading Platform 
Fee of $5,000 per trading platform up to a maximum of three trading 
platforms for depth-of-book data). See also NYSE Market Data Fees, 
November 2015 (providing a monthly fee for non-display usage of 
$5,000 for NYSE OpenBook).
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Implementation Date
    The Exchange proposes to implement the proposed changes to its fee 
schedule on January 4, 2016.
2. Statutory Basis
    The Exchange believes that the proposed rule change is consistent 
with the objectives of Section 6 of the Act,\13\ in general, and 
furthers the objectives of Section 6(b)(4),\14\ in particular, as it is 
designed to provide for the equitable allocation of reasonable dues, 
fees and other charges among its members and other recipients of 
Exchange data. The Exchange believes that the proposed rates are 
equitable and non-discriminatory in that they apply uniformly to all 
recipients of Exchange data. The Exchange believes the proposed fees 
are competitive with those charged by other venues and, therefore, 
reasonable and equitably allocated to recipients. Lastly, the Exchange 
also believes that the proposed fees are reasonable and non-
discriminatory because they will apply uniformly to all recipients of 
Exchange data.
---------------------------------------------------------------------------

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

    The Exchange also believes that the proposed rule change is 
consistent with Section 11(A) of the Act \15\ in that it supports (i) 
fair competition among brokers and dealers, among exchange markets, and 
between exchange markets and markets other than exchange markets and 
(ii) the availability to brokers, dealers, and investors of information 
with respect to quotations for and transactions in securities. 
Furthermore, the proposed rule change is consistent with Rule 603 of 
Regulation NMS,\16\ which provides that any national securities 
exchange that distributes information with respect to quotations for or 
transactions in an NMS stock do so on terms that are not unreasonably 
discriminatory. In adopting Regulation NMS, the Commission granted 
self-regulatory organizations and broker-dealers increased authority 
and flexibility to offer new and unique market data to the public. It 
was believed that this authority would expand the amount of data 
available to consumers, and also spur innovation and competition for 
the provision of market data.
---------------------------------------------------------------------------

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

    In addition, the proposed fees would not permit unfair 
discrimination because all of the Exchange's subscribers will be 
subject to the proposed fees on an equivalent basis. BYX Depth is 
distributed and purchased on a voluntary basis, in that neither the 
Exchange nor market data distributors are required by any rule or 
regulation to make this data available. Accordingly, Distributors and 
Users can discontinue use at any time and for any reason, including due 
to an assessment of the reasonableness of fees charged. Firms have a 
wide variety of alternative market data products from which to choose, 
such as similar proprietary data products offered by other exchanges 
and consolidated data. Moreover, the Exchange is not required to make 
any proprietary data products available or to offer any specific 
pricing alternatives to any customers.
    In addition, the fees that are the subject of this rule filing are 
constrained by competition. As explained below in the Exchange's 
Statement on Burden on Competition, the existence of alternatives to 
BYX Depth further ensures that the Exchange cannot set unreasonable 
fees, or fees that are unreasonably discriminatory, when subscribers 
can elect such alternatives. That is, the Exchange competes with other 
exchanges (and their affiliates) that provide similar market data 
products. If another exchange (or its affiliate) were to charge less to 
consolidate and distribute its similar product than the Exchange 
charges to consolidate and distribute BYX Depth, prospective Users 
likely would not subscribe to, or would cease subscribing to, BYX 
Depth.
    The Exchange notes that the Commission is not required to undertake 
a cost-of-service or rate-making approach. The Exchange believes that, 
even if it were possible as a matter of economic theory, cost-based 
pricing for non-core market data would be so complicated that it could 
not be done practically.\17\
---------------------------------------------------------------------------

    \17\ The Exchange believes that cost-based pricing would be 
impractical because it would create enormous administrative burdens 
for all parties, including the Commission, to cost-regulate a large 
number of participants and standardize and analyze extraordinary 
amounts of information, accounts, and reports. In addition, it is 
impossible to regulate market data prices in isolation from prices 
charged by markets for other services that are joint products. Cost-
based rate regulation would also lead to litigation and may distort 
incentives, including those to minimize costs and to innovate, 
leading to further waste. Under cost-based pricing, the Commission 
would be burdened with determining a fair rate of return, and the 
industry could experience frequent rate increases based on 
escalating expense levels. Even in industries historically subject 
to utility regulation, cost-based ratemaking has been discredited. 
As such, the Exchange believes that cost-based ratemaking would be 
inappropriate for proprietary market data and inconsistent with 
Congress's direction that the Commission use its authority to foster 
the development of the national market system, and that market 
forces will continue to provide appropriate pricing discipline. See 
Appendix C to NYSE's comments to the Commission's 2000 Concept 
Release on the Regulation of Market Information Fees and Revenues, 
which can be found on the Commission's Web site at https://www.sec.gov/rules/concept/s72899/buck1.htm. See also Securities 
Exchange Act Release No. 73816 (December 11, 2014), 79 FR 75200 
(December 17, 2014) (SR-NYSE-2014-64) (Notice of Filing and 
Immediate Effectiveness of Proposed Rule Change to Establish an 
Access Fee for the NYSE Best Quote and Trades Data Feed, Operative 
December 1, 2014).

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[[Page 81583]]

    The proposed amendment to the Internal Distributor fee for BYX 
Depth is also equitable and reasonable as, despite the increase, the 
fee proposed continues to be less than similar fees currently charged 
by Nasdaq and NYSE for their depth-of-book data products.\18\ In 
addition, the proposed Non-Display Usage fee by Trading Platforms for 
BYX Depth is equitable and reasonable as the fees proposed is less than 
similar fees currently charged by Nasdaq for its depth-of-book data. In 
addition, unlike the Exchange, a subscriber utilizing Nasdaq depth-of-
book data on more than one Trading Platform would pay $5,000 per month 
for each up to a maximum fee of $15,000. The Exchange proposes to 
charge the same rate regardless of the number of Trading Platforms 
receiving the data for Non-Display Usage operated by that subscriber.
---------------------------------------------------------------------------

    \18\ See Nasdaq Rule 7023(c) (providing for fees of $25,000 to 
$500,000 to internal distributors of Nasdaq Depth-of-Book products). 
See also NYSE Market Data Fees, November 2015 (providing a $5,000 
per month access fee for NYSE OpenBook).
---------------------------------------------------------------------------

    The Trading Platform fee is also equitable and reasonable in that 
it ensures that heavy users of the BYX Depth pay an equitable share of 
the total fees. Currently, External Distributors pay higher fees than 
Internal Distributors based upon their assumed higher usage levels. The 
Exchange believes that Trading Platforms are generally high users of 
the data, using it to power a matching engine for millions or even 
billions of trading messages per day.
    Lastly, the Exchange believes that the proposed definitions are 
reasonable because they are designed to provide greater transparency to 
Members with regard to how the Exchange would assess the proposed fee 
for Non-Display Usage of BYX Depth by Trading Platforms. The Exchange 
believes that Members would benefit from clear guidance in its fee 
schedule describing the manner in which is assess fees. These 
definitions are intended to make the fee schedule clearer and less 
confusing for investors and eliminate potential investor confusion, 
thereby removing impediments to and perfecting the mechanism of a free 
and open market and a national market system, and, in general, 
protecting investors and the public interest. Lastly, the proposed 
definitions are based on existing rules of Nasdaq.\19\
---------------------------------------------------------------------------

    \19\ Nasdaq Rules 7023(a)(2)(B) and (a)(7).
---------------------------------------------------------------------------

B. Self-Regulatory Organization's Statement on Burden on Competition

    The Exchange does not believe that the proposed rule change will 
result in any burden on competition that is not necessary or 
appropriate in furtherance of the purposes of the Act, as amended. The 
Exchange's ability to price BYX Depth is constrained by: (i) 
Competition among exchanges, other trading platforms, and Trade 
Reporting Facilities (``TRF'') that compete with each other in a 
variety of dimensions; (ii) the existence of inexpensive real-time 
consolidated data and market-specific data and free delayed data; and 
(iii) the inherent contestability of the market for proprietary data.
    The Exchange and its market data products are subject to 
significant competitive forces and the proposed fees represent 
responses to that competition. To start, the Exchange competes 
intensely for order flow. It competes with the other national 
securities exchanges that currently trade equities, with electronic 
communication networks, with quotes posted in FINRA's Alternative 
Display Facility, with alternative trading systems, and with securities 
firms that primarily trade as principal with their customer order flow.
    In addition, BYX Depth competes with a number of alternative 
products. For instance, BYX Depth does not provide a complete picture 
of all trading activity in a security. Rather, the other national 
securities exchanges, the several TRFs of FINRA, and ECNs that produce 
proprietary data all produce trades and trade reports. Each is 
currently permitted to produce depth-of-book information products, and 
many currently do, including Nasdaq and NYSE.
    In sum, the availability of a variety of alternative sources of 
information imposes significant competitive pressures on Exchange data 
products and the Exchange's compelling need to attract order flow 
imposes significant competitive pressure on the Exchange to act 
equitably, fairly, and reasonably in setting the proposed data product 
fees. The proposed data product fees are, in part, responses to that 
pressure. The Exchange believes that the proposed fees would reflect an 
equitable allocation of its overall costs to users of its facilities.
    In addition, when establishing the proposed fees, the Exchange 
considered the competitiveness of the market for proprietary data and 
all of the implications of that competition. The Exchange believes that 
it has considered all relevant factors and has not considered 
irrelevant factors in order to establish fair, reasonable, and not 
unreasonably discriminatory fees and an equitable allocation of fees 
among all Users. The existence of alternatives to BYX Depth, including 
existing similar feeds by other exchanges, consolidated data, and 
proprietary data from other sources, ensures that the Exchange cannot 
set unreasonable fees, or fees that are unreasonably discriminatory, 
when subscribers can elect these alternatives or choose not to purchase 
a specific proprietary data product if its cost to purchase is not 
justified by the returns any particular vendor or subscriber would 
achieve through the purchase.
    The Exchange believes the proposed increase to the Internal 
Distributor fee and adoption of the fee for Non-Display Usage by 
Trading Platforms for BYX Depth would increase competition amongst the 
exchanges that offer depth-of-book products. The Exchange notes that, 
despite the proposed increase, the Internal Distribution fee for BYX 
Depth continues to be less than similar fees currently charged by 
Nasdaq and NYSE for its depth-of-book data.\20\ In addition, the 
proposed Non-Display Usage fee by Trading Platforms is less than 
similar fees currently charged by Nasdaq for its Depth-of-Book 
data.\21\
---------------------------------------------------------------------------

    \20\ See supra note 18.
    \21\ See supra note 19.
---------------------------------------------------------------------------

    Lastly, the proposed definitions will not result in any burden on 
competition. The Exchange believes that Members would benefit from 
clear guidance in its fee schedule describing the manner in which is 
assess fees. These definitions are intended to make the fee schedule 
clearer and less confusing for investors and are not designed to have a 
competitive impact.

C. Self-Regulatory Organization's Statement on Comments on the Proposed 
Rule Change Received From Members, Participants, or Others

    The Exchange has neither solicited nor received written comments on 
the proposed rule change.

III. Date of Effectiveness of the Proposed Rule Change and Timing for 
Commission Action

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A)

[[Page 81584]]

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

    \22\ 15 U.S.C. 78s(b)(3)(A).
    \23\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------

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

    \24\ 17 CFR 200.30-3(a)(12).
---------------------------------------------------------------------------

Brent J. Fields,
Secretary.
[FR Doc. 2015-32898 Filed 12-29-15; 8:45 am]
 BILLING CODE 8011-01-P
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