Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Fees for Certain CBOE Real-Time Data Feeds, 1268-1272 [2016-254]

Download as PDF 1268 Federal Register / Vol. 81, No. 6 / Monday, January 11, 2016 / Notices 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: 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 rulecomments@sec.gov. Please include File Number SR–NASDAQ–2015–163 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–2015–163. 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–2015–163 and should be submitted on or before February 1, 2016. For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.16 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–252 Filed 1–8–16; 8:45 am] BILLING CODE 8011–01–P SECURITIES AND EXCHANGE COMMISSION [Release No. 34–76828; File No. SR–CBOE– 2015–115] Self-Regulatory Organizations; Chicago Board Options Exchange, Incorporated; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Relating to Fees for Certain CBOE Real-Time Data Feeds January 5, 2016. 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 22, 2015, Chicago Board Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘CBOE’’) 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 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 Chicago Board Options Exchange, Incorporated (the ‘‘Exchange’’ or ‘‘CBOE’’) proposes to amend fees for certain CBOE real-time data feeds. The text of the proposed rule change is available on the Exchange’s Web site (https://www.cboe.com/AboutCBOE/ CBOELegalRegulatoryHome.aspx), at the Exchange’s Office of the Secretary, and at the Commission’s Public Reference Room. 16 17 efficiency, competition, and capital formation. See 15 U.S.C. 78c(f). VerDate Sep<11>2014 18:17 Jan 08, 2016 Jkt 238001 CFR 200.30–3(a)(12) and (59). U.S.C. 78s(b)(1). 2 17 CFR 240.19b–4. 1 15 PO 00000 Frm 00106 Fmt 4703 Sfmt 4703 II. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change In its filing with the Commission, the Exchange included statements concerning the purpose of and basis for the proposed rule change and discussed any comments it received on the proposed rule change. The text of these statements may be examined at the places specified in Item IV below. The Exchange has prepared summaries, set forth in sections A, B, and C below, of the most significant aspects of such statements. A. Self-Regulatory Organization’s Statement of the Purpose of, and Statutory Basis for, the Proposed Rule Change 1. Purpose The purpose of the proposed rule change is to amend fees for the BBO Data Feed and Book Depth Data Feed. These data feeds are made available by CBOE’s affiliate Market Data Express, LLC (‘‘MDX’’).3 BBO and Book Depth Data Feeds BBO Data Feed: The BBO Data Feed is a real-time, low latency data feed that includes the following content: (i) Outstanding quotes and standing orders at the best available price level on each side of the market, with aggregate size (‘‘BBO data’’), and last sale data; 4 (ii) totals of customer versus non-customer contracts at the BBO, (iii) All-or-None contingency orders priced better than or equal to the BBO, (iv) BBO and last sale data for complex strategies (e.g., spreads, straddles, buy-writes, etc.); (v) expected opening price (‘‘EOP’’) and expected opening size (‘‘EOS’’) information that is disseminated prior to the opening of the market and during trading rotations, (vi) end-of-day (‘‘EOD’’) summary messages that are disseminated after the close of a trading session that include summary 3 MDX also offers real-time Complex Order Book (‘‘COB’’) and Flexible Exchange (‘‘FLEX’’) Options Data Feeds. The COB Data Feed includes data regarding the Exchange’s Complex Order Book and related complex order information. The COB Data Feed includes BBO, Book Depth and last sale data for all CBOE-traded complex order strategies and identifies customer orders and trades. The Exchange is not proposing to amend fees for the COB Data Feed at this time. The FLEX Options Data Feed includes BBO and last sale data for FLEX options traded on the CBOE FLEX Hybrid Trading System, including BBO and last sale data for FLEX complex strategies. The FLEX Options Data Feed is currently made available at no charge. The Exchange is not proposing to establish fees for the FLEX Options Data Feed at this time. 4 ‘‘Best bid and offer’’ or ‘‘BBO’’ data is sometimes referred to as ‘‘top-of-book’’ data. Data with respect to executed trades is referred to as ‘‘last sale’’ data. E:\FR\FM\11JAN1.SGM 11JAN1 Federal Register / Vol. 81, No. 6 / Monday, January 11, 2016 / Notices information about trading in CBOE listed options (i.e., product name, opening price, high and low price during the trading session and last sale price), (vii) ‘‘recap messages’’ that are disseminated during a trading session any time there is a change in the open, high, low or last sale price of a CBOE listed option, as well as product name and total volume traded in the product during the trading session; and (viii) product IDs and codes for all CBOE listed options contracts. The BBO Data Feed includes market data for simple options as well as complex strategies. The data in the BBO Data Feed is refreshed periodically during the trading session.5 The BBO and last sale data contained in the BBO Data Feed is identical to the data sent to the Options Price Reporting Authority (‘‘OPRA’’) for redistribution to the public.6 Book Depth Data Feed: The Book Depth Data Feed is a real-time, low latency data feed that includes all data contained in the BBO Data Feed (as described above) plus outstanding quotes and standing orders up to the first four price levels on each side of the market, with aggregate size (‘‘Book Depth’’). The data in the Book Depth Data Feed is refreshed periodically during the trading session.7 mstockstill on DSK4VPTVN1PROD with NOTICES Fees BBO Data Feed Fees: MDX currently charges a ‘‘Data Fee’’, payable by a Customer, of $6,000 per month for internal use and external redistribution of the BBO Data Feed.8 The Data Fee entitles a Customer to provide the BBO Data Feed to an unlimited number of internal users and Devices 9 within the Customer. A Customer receiving the BBO Data Feed from another Customer is assessed the Data Fee by MDX pursuant to its own market data agreement with MDX, and is entitled to use the Data internally and/or distribute 5 The data is made available during ‘‘Regular Trading Hours’’ as defined in CBOE Rule 1.1(qqq) and ‘‘Extended Trading Hours’’ as defined in CBOE Rule 1.1(rrr). 6 MDX makes available to Customers the BBO data and last sale data that is included in the BBO Data Feed no earlier than the time at which the Exchange sends that data to OPRA. 7 The data is made available during Regular Trading Hours and Extended Trading Hours. 8 A BBO Data Feed ‘‘Customer’’ is any person, company or other entity that, pursuant to a market data agreement with MDX, is entitled to receive data, either directly from MDX or through an authorized redistributor (i.e., a Customer or an extranet service provider), whether that data is distributed externally or used internally. The MDX fee schedule for CBOE data is located at https:// www.cboe.org/MDX/CSM/OBOOKMain.aspx. 9 A ‘‘Device’’ means any computer, workstation or other item of equipment, fixed or portable, that receives, accesses and/or displays data in visual, audible or other form. VerDate Sep<11>2014 18:17 Jan 08, 2016 Jkt 238001 it externally.10 All Customers have the same rights to utilize the data internally and/or distribute it externally as long as the Customer has entered into a written agreement with MDX for the data and pays the Data Fee. The Exchange proposes to increase the Data Fee from $6,000 per month to $7,000 per month. The Exchange currently charges a ‘‘User Fee’’, payable by a Customer, of $50 per month per Device or user ID for use of data in the BBO Data Feed by ‘‘Display Only Service’’ users.11 User fees are payable only for ‘‘external’’ Display Only Service users (Devices or user IDs of Display Only Service users who are not employees or natural person independent contractors of the Customer, the Customer’s affiliates or an authorized service facilitator).12 The Exchange is not proposing to amend the User Fee at this time. Book Depth Data Feed Fees: MDX currently charges a ‘‘Data Fee’’, payable by a Customer (as defined above), of $6,000 per month for internal use and external redistribution of the Book Depth Data Feed. The Data Fee for the Book Depth Data Feed entitles a Customer to provide the Book Depth Data Feed to an unlimited number of internal users and Devices within the Customer. A Customer receiving the Book Depth Data Feed from another Customer is assessed the Data Fee by MDX pursuant to its own market data agreement with MDX, and is entitled to use the Data internally and/or distribute it externally. All Customers have the same rights to utilize the Book Depth data internally and/or distribute it externally as long as the Customer has entered into a written agreement with MDX for the data and pays the Data Fee. BBO Data Feed Customers may upgrade to become Book Depth Data Feed Customers without paying any additional Data Fee.13 The Exchange proposes to increase the Data Fee from $6,000 per month to $7,000 per month. The Exchange currently charges a ‘‘User Fee’’, payable 10 A Customer may choose to receive the data from another Customer rather than directly from MDX’s system because it does not want to or is not equipped to manage the technology necessary to establish a direct connection to MDX. 11 A ‘‘Display Only Service’’ allows a natural person end-user to view and manipulate data using the Customer’s computerized service, but not to save, copy, export or transfer the data or any results of the manipulation to any other computer hardware, software or media, except for printing it to paper or other non-magnetic media. 12 An entity or person that receives BBO data from a Customer through a Display Only Service is not a ‘‘Customer’’ unless it has a market data agreement in place with MDX. 13 Such Customers would still be subject to Display Only Service User Fees as described below. PO 00000 Frm 00107 Fmt 4703 Sfmt 4703 1269 by a Customer, of $50 per month per Device or user ID for use of data in the Book Depth Data Feed by ‘‘Display Only Service’’ users (as defined above). User fees are payable only for ‘‘external’’ Display Only Service users (Devices or user IDs of Display Only Service users who are not employees or natural person independent contractors of the Customer, the Customer’s affiliates or an authorized service facilitator).14 The Exchange is not proposing to amend the User Fee at this time. The Exchange also proposes to make a few clean-up changes to the MDX fee schedule for CBOE data, including removing several references to a January 1, 2015 effective date for prior fee changes. The proposed fee changes would be effective on January 1, 2016. 2. Statutory Basis The Exchange believes the proposed rule change is consistent with the Securities Exchange Act of 1934 (the ‘‘Act’’) and the rules and regulations thereunder applicable to the Exchange and, in particular, the requirements of Section 6(b) of the Act.15 Specifically, the Exchange believes the proposed rule change is consistent with Section 6(b)(4) of the Act,16 which requires that Exchange rules provide for the equitable allocation of reasonable dues, fees, and other charges among its Trading Permit Holders and other persons using its facilities. The Exchange also believes the proposed rule change is consistent with the Section 6(b)(5) 17 requirement that the rules of an exchange not be designed to permit unfair discrimination between customers, issuers, brokers, or dealers. The proposed increases in the Data Fees for the BBO and Book Depth Data Feeds are intended to generate revenues that are needed to cover CBOE’s actual and anticipated increases in the costs of collecting, processing and disseminating options market information and assuring the reliability and integrity of that information, as well as increases in CBOE’s administrative costs. These costs include enhancements to CBOE’s systems that are needed in order to enable CBOE to handle the continually increasing volume of market information and to accommodate the dissemination of data during Extended Trading Hours. 14 An entity or person that receives Book Depth data from a Customer through a Display Only Service is not a ‘‘Customer’’ unless it has a market data agreement in place with MDX. 15 15 U.S.C. 78f(b). 16 15 U.S.C. 78f(b)(4). 17 15 U.S.C. 78f(b)(5). E:\FR\FM\11JAN1.SGM 11JAN1 mstockstill on DSK4VPTVN1PROD with NOTICES 1270 Federal Register / Vol. 81, No. 6 / Monday, January 11, 2016 / Notices countervailing basis exists to support a finding that the proposed fees for the BBO and Book Depth Data Feeds fail to meet the requirements of the Act. The Exchange believes the proposed increase in the Data Fee for BBO data is equitable and not unfairly discriminatory because it would apply equally to all Customers. The Exchange believes the proposed Data Fee is reasonable because it compares favorably to fees that other markets charge for similar products. For example, NASDAQ OMX PHLX charges Internal Distributors a monthly fee of $4,000 per organization and External Distributors a monthly fee of $5,000 per organization (i.e., a total of $9,000 per month for internal use and external redistribution) for its ‘‘TOPO Plus Orders’’ data feed, which like the BBO Data Feed includes top-of-book data (including orders, quotes and trades) and other market data.18 The International Securities Exchange offers a ‘‘Top Quote Feed’’, which includes top-of-book data, and a separate ‘‘Spread Feed’’, which like the BBO Data Feed includes order and quote data for complex strategies (i.e., a customer must subscribe to both feeds to receive data comparable to the BBO Data Feed). ISE charges distributors of its Top Quote Feed a base monthly fee of $3,000 plus $20 per month per controlled device. ISE charges distributors of its Spread Feed a base monthly fee of $3,000 plus $25 per month per controlled device.19 The Exchange believes the proposed increase in the Data Fee for Book Depth data is equitable and not unfairly discriminatory because it would apply equally to all Customers. The Exchange believes the proposed Data Fee is reasonable because it compares favorably to fees that other markets charge for similar products. For example, the International Securities Exchange offers a ‘‘Depth of Market’’ Feed, which includes the aggregated volume of all quotes and orders available at each of the top five price levels for simple (single legged) instruments, and a separate Spread Feed, which like the Book Depth Data Feed includes order and quote data for complex strategies (i.e., a customer must subscribe to both feeds to receive data comparable to the Book Depth Data Feed). ISE charges distributors of its Depth of Market Feed a base monthly fee of $5,000 plus $50 per month per controlled device. ISE charges distributors of its Spread Feed a base monthly fee of $3,000 plus $25 per month per controlled device.20 NASDAQ OMX PHLX charges Internal Distributors a monthly fee of $4,000 and External Distributors a monthly fee of a $4,500 (i.e., a total of $8,500 per month for internal use and external redistribution) for its Depth of Market data feed that includes full depth of quotes and orders and last sale data for options listed on PHLX.21 The decision of the United States Court of Appeals for the District of Columbia Circuit in NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010), upheld reliance by the Securities and Exchange Commission (‘‘Commission’’) upon the existence of competitive market mechanisms to set reasonable and equitably allocated fees for proprietary market data: Id. At 535 (quoting H.R. Rep. No. 94– 229 at 92 (1975), as reprinted in 1975 U.S.C.C.A.N. 323). The court agreed with the Commission’s conclusion that ‘‘Congress intended that ‘competitive forces should dictate the services and practices that constitute the U.S. national market system for trading equity securities.’ ’’22 As explained below in the Exchange’s Statement on Burden on Competition, the Exchange believes that there is substantial evidence of competition in the marketplace for proprietary market data and that the Commission can rely upon such evidence in concluding that the fees established in this filing are the product of competition and therefore satisfy the relevant statutory standards. In addition, the existence of alternatives to these data products, such as consolidated data and proprietary data from other sources, as described below, further ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can select such alternatives. For the reasons cited above, the Exchange believes the proposed fees for the BBO and Book Depth Data Feeds are equitable, reasonable and not unfairly discriminatory. In addition, the Exchange believes that no substantial B. Self-Regulatory Organization’s Statement on Burden on Competition CBOE does not believe that the proposed rule change will impose any burden on competition that is not necessary or appropriate in furtherance of the purposes of the Act. An exchange’s ability to price its proprietary data market feed products is constrained by (1) the existence of actual competition for the sale of such data, (2) the joint product nature of exchange platforms, and (3) the existence of alternatives to the Exchange’s proprietary data. The Existence of Actual Competition. The Exchange believes competition provides an effective constraint on the market data fees that the Exchange, through MDX, has the ability and the incentive to charge. CBOE has a compelling need to attract order flow from market participants in order to maintain its share of trading volume. This compelling need to attract order flow imposes significant pressure on CBOE to act reasonably in setting its fees for market data, particularly given that the market participants that will pay such fees often will be the same market participants from whom CBOE must attract order flow. These market participants include broker-dealers that control the handling of a large volume of customer and proprietary order flow. Given the portability of order flow from one exchange to another, any exchange that sought to charge unreasonably high data fees would risk alienating many of the same customers on whose orders it depends for competitive survival. CBOE currently competes with twelve options exchanges (including CBOE’s affiliate, C2 Options Exchange) for order flow.23 In addition, in the case of products that are distributed through market data vendors, the market data vendors themselves provide additional price discipline for proprietary data products because they control the primary means of access to certain end users. These vendors impose price discipline based upon their business models. For example, vendors that assess a surcharge on data they sell are able to refuse to offer proprietary products that their end users do not or will not 18 See IX. Proprietary Data Feed Fees, TOPO Plus Orders, available at https://www.nasdaqtrader.com/ Micro.aspx?id=phlxpricing. 19 See ISE Schedule of Fees available at https:// www.ise.com/assets/documents/OptionsExchange/ legal/fee/ISE_fee_schedule.pdf. 20 Supra Note 19. 21 See IX. Proprietary Data Feed Fees, PHLX Depth Data, available at https:// www.nasdaqtrader.com/Micro.aspx?id=phlxpricing. 22 NetCoalition, 615 F.3d at 535 (Quoting Securities Exchange Act Release No. 59039 (December 9 [sic], 2008), 73 FR 74770 (December 9, 2008) at 74771). 23 The Commission has previously made a finding that the options industry is subject to significant competitive forces. See e.g., Securities Exchange Act Release No. 59949 (May 20, 2009), 74 FR 25593 (May 28, 2009) (SR–ISE–2009–97) (order approving ISE’s proposal to establish fees for a real-time depth of market data offering). VerDate Sep<11>2014 18:17 Jan 08, 2016 Jkt 238001 In fact, the legislative history indicates that the Congress intended that the market system ‘evolve through the interplay of competitive forces as unnecessary regulatory restrictions are removed’ and that the SEC wield its regulatory power ‘in those situations where competition may not be sufficient,’ such as in the creation of a ‘consolidated transactional reporting system.’ PO 00000 Frm 00108 Fmt 4703 Sfmt 4703 E:\FR\FM\11JAN1.SGM 11JAN1 mstockstill on DSK4VPTVN1PROD with NOTICES Federal Register / Vol. 81, No. 6 / Monday, January 11, 2016 / Notices purchase in sufficient numbers. Internet portals, such as Google, impose price discipline by providing only data that they believe will enable them to attract ‘‘eyeballs’’ that contribute to their advertising revenue. Similarly, Customers will not offer the BBO or Book Depth Data Feeds unless these products will help them maintain current users or attract new ones. For example, a broker-dealer will not choose to offer the BBO or Book Depth Data Feeds to its retail customers unless the broker-dealer believes that the retail customers will use and value the data and the provision of such data will help the broker-dealer maintain the customer relationship, which allows the brokerdealer to generate profits for itself. Professional users will not request any of these feeds from Customers unless they can use the data for profitgenerating purposes in their businesses. All of these operate as constraints on pricing proprietary data products. Joint Product Nature of Exchange Platform. Transaction execution and proprietary data products are complementary in that market data is both an input and a byproduct of the execution service. In fact, market data and trade executions are a paradigmatic example of joint products with joint costs. The decision whether and on which platform to post an order will depend on the attributes of the platforms where the order can be posted, including the execution fees, data quality, and price and distribution of their data products. The more trade executions a platform does, the more valuable its market data products become. 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, an exchange’s broker-dealer customers view the costs of transaction executions and market data as a unified cost of doing business with the exchange. Analyzing the cost of market data product production and distribution in isolation from the cost of all of the inputs supporting the creation of market data and market data products will inevitably underestimate the cost of the data and data products because it is impossible to obtain the data inputs to create market data products without a fast, technologically robust, and wellregulated execution system, and system VerDate Sep<11>2014 18:17 Jan 08, 2016 Jkt 238001 costs and regulatory costs affect the price of both obtaining the market data itself and creating and distributing market data products. It would be equally misleading, however, to attribute all of an exchange’s costs to the market data portion of an exchange’s joint products. Rather, all of an exchange’s costs are incurred for the unified purposes of attracting order flow, executing and/or routing orders, and generating and selling data about market activity. The total return that an exchange earns reflects the revenues it receives from the joint products and the total costs of the joint products. The level of competition and contestability in the market is evident in the numerous alternative venues that compete for order flow, including 12 options self-regulatory organization (‘‘SRO’’) markets, as well as various forms of alternative trading systems (‘‘ATSs’’), including dark pools and electronic communication networks (‘‘ECNs’’) and internalizing brokerdealers (‘‘BDs’’). Competition among trading platforms can be expected to constrain the aggregate return that 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. For example, some platforms may choose to pay rebates to attract orders, charge relatively low prices for market data products (or provide market data products free of charge), and charge relatively high prices for accessing posted liquidity. Other platforms may choose a strategy of paying lower rebates (or no rebates) to attract orders, setting relatively high prices for market data products, and setting relatively low prices for accessing posted liquidity. In this environment, there is no economic basis for regulating maximum prices for one of the joint products in an industry in which suppliers face competitive constraints with regard to the joint offering. The Existence of Alternatives. CBOE is constrained in pricing the BBO and Book Depth Data Feeds by the availability to market participants of alternatives to purchasing these products. CBOE must consider the extent to which market participants would choose one or more alternatives instead of purchasing the exchange’s data. Other options exchanges can and have produced their own top-of-book and book depth market data products, and thus are sources of potential competition for MDX. For example, as noted above, ISE and NASDAQ OMX PHLX offer market data products that compete with the BBO and Book Depth PO 00000 Frm 00109 Fmt 4703 Sfmt 4703 1271 Data Feeds. The NYSE offers market data products entitled ‘‘NYSE ArcaBook for Amex Options’’ and ‘‘NYSE ArcaBook for Arca Options’’ that include top-of-book, last sale and market depth data similar to the data in the BBO and Book Depth Data Feeds. The large number of SROs, BDs, and ATSs that currently produce proprietary data or are currently capable of producing it provides further pricing discipline for proprietary data products. Each SRO, ATS, and BD is currently permitted to produce proprietary data products, and many currently do. In addition, the OPRA data feed is a significant competitive alternative to the BBO and last sale data included in the BBO and Book Depth Data Feeds. Further, data products are valuable to professional users only if they can be used for profit-generating purposes in their businesses and valuable to nonprofessional users only insofar as they provide information that such users expect will assist them in tracking prices and market trends and making trading decisions. The existence of numerous alternatives to the Exchange’s products, including proprietary data from other sources, ensures that the Exchange cannot set unreasonable fees, or fees that are unreasonably discriminatory, when vendors and subscribers can elect these alternatives or choose not to purchase a specific proprietary data product if its cost to purchase is not justified by the returns any particular vendor or subscriber would achieve through the purchase. C. Self-Regulatory Organization’s Statement on Comments on the Proposed Rule Change Received From Members, Participants, or Others The Exchange neither solicited nor received comments on the proposed rule change. III. Date of Effectiveness of the Proposed Rule Change and Timing for Commission Action The foregoing rule change has become effective pursuant to Section 19(b)(3)(A) of the Act 24 and paragraph (f) of Rule 19b–4 25 thereunder. 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 24 15 25 17 E:\FR\FM\11JAN1.SGM U.S.C. 78s(b)(3)(A). CFR 240.19b–4(f). 11JAN1 1272 Federal Register / Vol. 81, No. 6 / Monday, January 11, 2016 / Notices Commission will institute proceedings to determine whether the proposed rule change should be approved or disapproved. IV. Solicitation of Comments For the Commission, by the Division of Trading and Markets, pursuant to delegated authority.26 Robert W. Errett, Deputy Secretary. [FR Doc. 2016–254 Filed 1–8–16; 8:45 am] 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: BILLING CODE 8011–01–P Electronic Comments AGENCY: • Use the Commission’s Internet comment form (https://www.sec.gov/ rules/sro.shtml); or • Send an email to rulecomments@sec.gov. Please include File Number SR–CBOE–2015–115 on the subject line. Paper Comments mstockstill on DSK4VPTVN1PROD with NOTICES • 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–CBOE–2015–115. 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–CBOE– 2015–115 and should be submitted on or before February 1, 2016. VerDate Sep<11>2014 18:17 Jan 08, 2016 Jkt 238001 SMALL BUSINESS ADMINISTRATION Announcement of Lean for Main Street Training Challenge U.S. Small Business Administration. ACTION: Notice. The U.S. Small Business Administration (SBA) announces the Lean for Main Street Training Challenge, pursuant to the America Competes Act, to encourage current SBA Women’s Business Centers, Small Business Development Centers, and SCORE Chapters—to identify ways of adapting framework established under the National Science Foundation’s successful I-CorpsTM business assistance program for small businesses and aspiring entrepreneurs that have not had much exposure to those kinds of resources. SUMMARY: The submission period for entries will begin at 12:00 p.m. EDT, January 11, 2016, and end February 10, 2016, at 11:59 p.m. EDT. SBA anticipates that winners will be announced no later than February 29, 2016. DATES: FOR FURTHER INFORMATION CONTACT: Matthew Stevens, Strategic Initiatives Manager, Office of Entrepreneurial Development, U.S. Small Business Administration, 409 Third Street SW., 6th Floor, Washington, DC 20416, (202) 205–7699, LeanChallenge@sba.gov. SUPPLEMENTARY INFORMATION: Competition Details 1. Subject of Challenge Competition: Given the success and growing popularity of the National Science Foundation’s I-CorpsTM program (see https://www.nsf.gov/news/special_ reports/i-corps/about.jsp), the SBA is interested in the potential for using adapted versions of that program as a means to assist a broader array of small businesses and aspiring entrepreneurs operating outside the I-CorpsTM program’s current focus on technologybased businesses or commercialization concepts. For reference, the I-CorpsTM program involves expert business trainers helping teams of scientists and 26 17 PO 00000 CFR 200.30–3(a)(12). Frm 00110 Fmt 4703 Sfmt 4703 entrepreneurs apply ‘‘lean principles’’— a collection of practices and concepts for business model analysis—to those scientists’ and entrepreneurs’ nascent entrepreneurial efforts. Given the SBA’s esteem for the success of this program, the SBA has partnered with the National Science Foundation (NSF) to offer the Lean for Main Street Training Challenge to current SBA Women’s Business Centers, Small Business Development Centers, and SCORE Chapters (‘‘Contestants’’). Contestants selected as winners will participate in the development and deployment of innovative ‘‘lean startup’’ resources that can be delivered to small businesses in sectors or regions that have not had significant exposure or access to these resources. Winning Contestant representatives will participate in an inperson and virtual train-the-trainer program and forum with I-CorpsTM national instructors to develop an innovative framework for exposing lean methodology to businesses in traditional sectors. Winners will then implement these newly-developed lean training resources to businesses in their respective communities on a pilot basis and provide SBA with an assessment of their effectiveness. 2. Eligibility Rules for Participating in the Competition: Only current recipients or sub-recipients in good standing of grants and cooperative agreements from SBA under the Women’s Business Center, Small Business Development Center (both lead and service centers are eligible), or SCORE programs (‘‘Resource Partners’’) are eligible to take part in this competition. To be eligible to win a prize under this Competition, a Contestant: (a) Shall have registered to participate in the competition under the rules promulgated by SBA; (b) Shall have complied with all the requirements under this Notice; (c) In the case of a private entity, shall be incorporated in and maintain a primary place of business in the United States, and (d) May not be a Federal entity or Federal employee acting within the scope of their employment; (e) Shall not be an SBA employee working on their applications during assigned duty hours. 3. Registration Process for Contestants: Contestants will submit their application through challenge.gov. Winners will be required to have an account in System for Award Management (SAM) https:// www.sam.gov to receive the award. 4. Amount of Prize: Through the Lean for Main Street Training Challenge, the SBA will award up to five cash prizes E:\FR\FM\11JAN1.SGM 11JAN1

Agencies

[Federal Register Volume 81, Number 6 (Monday, January 11, 2016)]
[Notices]
[Pages 1268-1272]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-254]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-76828; File No. SR-CBOE-2015-115]


Self-Regulatory Organizations; Chicago Board Options Exchange, 
Incorporated; Notice of Filing and Immediate Effectiveness of a 
Proposed Rule Change Relating to Fees for Certain CBOE Real-Time Data 
Feeds

January 5, 2016.
    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 22, 2015, Chicago Board Options Exchange, 
Incorporated (the ``Exchange'' or ``CBOE'') 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 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

    Chicago Board Options Exchange, Incorporated (the ``Exchange'' or 
``CBOE'') proposes to amend fees for certain CBOE real-time data feeds. 
The text of the proposed rule change is available on the Exchange's Web 
site (https://www.cboe.com/AboutCBOE/CBOELegalRegulatoryHome.aspx), at 
the Exchange's Office of the Secretary, and at the Commission's Public 
Reference Room.

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

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

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

1. Purpose
    The purpose of the proposed rule change is to amend fees for the 
BBO Data Feed and Book Depth Data Feed. These data feeds are made 
available by CBOE's affiliate Market Data Express, LLC (``MDX'').\3\
---------------------------------------------------------------------------

    \3\ MDX also offers real-time Complex Order Book (``COB'') and 
Flexible Exchange (``FLEX'') Options Data Feeds. The COB Data Feed 
includes data regarding the Exchange's Complex Order Book and 
related complex order information. The COB Data Feed includes BBO, 
Book Depth and last sale data for all CBOE-traded complex order 
strategies and identifies customer orders and trades. The Exchange 
is not proposing to amend fees for the COB Data Feed at this time. 
The FLEX Options Data Feed includes BBO and last sale data for FLEX 
options traded on the CBOE FLEX Hybrid Trading System, including BBO 
and last sale data for FLEX complex strategies. The FLEX Options 
Data Feed is currently made available at no charge. The Exchange is 
not proposing to establish fees for the FLEX Options Data Feed at 
this time.
---------------------------------------------------------------------------

BBO and Book Depth Data Feeds
    BBO Data Feed: The BBO Data Feed is a real-time, low latency data 
feed that includes the following content: (i) Outstanding quotes and 
standing orders at the best available price level on each side of the 
market, with aggregate size (``BBO data''), and last sale data; \4\ 
(ii) totals of customer versus non-customer contracts at the BBO, (iii) 
All-or-None contingency orders priced better than or equal to the BBO, 
(iv) BBO and last sale data for complex strategies (e.g., spreads, 
straddles, buy-writes, etc.); (v) expected opening price (``EOP'') and 
expected opening size (``EOS'') information that is disseminated prior 
to the opening of the market and during trading rotations, (vi) end-of-
day (``EOD'') summary messages that are disseminated after the close of 
a trading session that include summary

[[Page 1269]]

information about trading in CBOE listed options (i.e., product name, 
opening price, high and low price during the trading session and last 
sale price), (vii) ``recap messages'' that are disseminated during a 
trading session any time there is a change in the open, high, low or 
last sale price of a CBOE listed option, as well as product name and 
total volume traded in the product during the trading session; and 
(viii) product IDs and codes for all CBOE listed options contracts. The 
BBO Data Feed includes market data for simple options as well as 
complex strategies. The data in the BBO Data Feed is refreshed 
periodically during the trading session.\5\ The BBO and last sale data 
contained in the BBO Data Feed is identical to the data sent to the 
Options Price Reporting Authority (``OPRA'') for redistribution to the 
public.\6\
---------------------------------------------------------------------------

    \4\ ``Best bid and offer'' or ``BBO'' data is sometimes referred 
to as ``top-of-book'' data. Data with respect to executed trades is 
referred to as ``last sale'' data.
    \5\ The data is made available during ``Regular Trading Hours'' 
as defined in CBOE Rule 1.1(qqq) and ``Extended Trading Hours'' as 
defined in CBOE Rule 1.1(rrr).
    \6\ MDX makes available to Customers the BBO data and last sale 
data that is included in the BBO Data Feed no earlier than the time 
at which the Exchange sends that data to OPRA.
---------------------------------------------------------------------------

    Book Depth Data Feed: The Book Depth Data Feed is a real-time, low 
latency data feed that includes all data contained in the BBO Data Feed 
(as described above) plus outstanding quotes and standing orders up to 
the first four price levels on each side of the market, with aggregate 
size (``Book Depth''). The data in the Book Depth Data Feed is 
refreshed periodically during the trading session.\7\
---------------------------------------------------------------------------

    \7\ The data is made available during Regular Trading Hours and 
Extended Trading Hours.
---------------------------------------------------------------------------

Fees
    BBO Data Feed Fees: MDX currently charges a ``Data Fee'', payable 
by a Customer, of $6,000 per month for internal use and external 
redistribution of the BBO Data Feed.\8\ The Data Fee entitles a 
Customer to provide the BBO Data Feed to an unlimited number of 
internal users and Devices \9\ within the Customer. A Customer 
receiving the BBO Data Feed from another Customer is assessed the Data 
Fee by MDX pursuant to its own market data agreement with MDX, and is 
entitled to use the Data internally and/or distribute it 
externally.\10\ All Customers have the same rights to utilize the data 
internally and/or distribute it externally as long as the Customer has 
entered into a written agreement with MDX for the data and pays the 
Data Fee.
---------------------------------------------------------------------------

    \8\ A BBO Data Feed ``Customer'' is any person, company or other 
entity that, pursuant to a market data agreement with MDX, is 
entitled to receive data, either directly from MDX or through an 
authorized redistributor (i.e., a Customer or an extranet service 
provider), whether that data is distributed externally or used 
internally. The MDX fee schedule for CBOE data is located at https://www.cboe.org/MDX/CSM/OBOOKMain.aspx.
    \9\ A ``Device'' means any computer, workstation or other item 
of equipment, fixed or portable, that receives, accesses and/or 
displays data in visual, audible or other form.
    \10\ A Customer may choose to receive the data from another 
Customer rather than directly from MDX's system because it does not 
want to or is not equipped to manage the technology necessary to 
establish a direct connection to MDX.
---------------------------------------------------------------------------

    The Exchange proposes to increase the Data Fee from $6,000 per 
month to $7,000 per month. The Exchange currently charges a ``User 
Fee'', payable by a Customer, of $50 per month per Device or user ID 
for use of data in the BBO Data Feed by ``Display Only Service'' 
users.\11\ User fees are payable only for ``external'' Display Only 
Service users (Devices or user IDs of Display Only Service users who 
are not employees or natural person independent contractors of the 
Customer, the Customer's affiliates or an authorized service 
facilitator).\12\ The Exchange is not proposing to amend the User Fee 
at this time.
---------------------------------------------------------------------------

    \11\ A ``Display Only Service'' allows a natural person end-user 
to view and manipulate data using the Customer's computerized 
service, but not to save, copy, export or transfer the data or any 
results of the manipulation to any other computer hardware, software 
or media, except for printing it to paper or other non-magnetic 
media.
    \12\ An entity or person that receives BBO data from a Customer 
through a Display Only Service is not a ``Customer'' unless it has a 
market data agreement in place with MDX.
---------------------------------------------------------------------------

    Book Depth Data Feed Fees: MDX currently charges a ``Data Fee'', 
payable by a Customer (as defined above), of $6,000 per month for 
internal use and external redistribution of the Book Depth Data Feed. 
The Data Fee for the Book Depth Data Feed entitles a Customer to 
provide the Book Depth Data Feed to an unlimited number of internal 
users and Devices within the Customer. A Customer receiving the Book 
Depth Data Feed from another Customer is assessed the Data Fee by MDX 
pursuant to its own market data agreement with MDX, and is entitled to 
use the Data internally and/or distribute it externally. All Customers 
have the same rights to utilize the Book Depth data internally and/or 
distribute it externally as long as the Customer has entered into a 
written agreement with MDX for the data and pays the Data Fee. BBO Data 
Feed Customers may upgrade to become Book Depth Data Feed Customers 
without paying any additional Data Fee.\13\
---------------------------------------------------------------------------

    \13\ Such Customers would still be subject to Display Only 
Service User Fees as described below.
---------------------------------------------------------------------------

    The Exchange proposes to increase the Data Fee from $6,000 per 
month to $7,000 per month. The Exchange currently charges a ``User 
Fee'', payable by a Customer, of $50 per month per Device or user ID 
for use of data in the Book Depth Data Feed by ``Display Only Service'' 
users (as defined above). User fees are payable only for ``external'' 
Display Only Service users (Devices or user IDs of Display Only Service 
users who are not employees or natural person independent contractors 
of the Customer, the Customer's affiliates or an authorized service 
facilitator).\14\ The Exchange is not proposing to amend the User Fee 
at this time.
---------------------------------------------------------------------------

    \14\ An entity or person that receives Book Depth data from a 
Customer through a Display Only Service is not a ``Customer'' unless 
it has a market data agreement in place with MDX.
---------------------------------------------------------------------------

    The Exchange also proposes to make a few clean-up changes to the 
MDX fee schedule for CBOE data, including removing several references 
to a January 1, 2015 effective date for prior fee changes.
    The proposed fee changes would be effective on January 1, 2016.
2. Statutory Basis
    The Exchange believes the proposed rule change is consistent with 
the Securities Exchange Act of 1934 (the ``Act'') and the rules and 
regulations thereunder applicable to the Exchange and, in particular, 
the requirements of Section 6(b) of the Act.\15\ Specifically, the 
Exchange believes the proposed rule change is consistent with Section 
6(b)(4) of the Act,\16\ which requires that Exchange rules provide for 
the equitable allocation of reasonable dues, fees, and other charges 
among its Trading Permit Holders and other persons using its 
facilities. The Exchange also believes the proposed rule change is 
consistent with the Section 6(b)(5) \17\ requirement that the rules of 
an exchange not be designed to permit unfair discrimination between 
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------

    \15\ 15 U.S.C. 78f(b).
    \16\ 15 U.S.C. 78f(b)(4).
    \17\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------

    The proposed increases in the Data Fees for the BBO and Book Depth 
Data Feeds are intended to generate revenues that are needed to cover 
CBOE's actual and anticipated increases in the costs of collecting, 
processing and disseminating options market information and assuring 
the reliability and integrity of that information, as well as increases 
in CBOE's administrative costs. These costs include enhancements to 
CBOE's systems that are needed in order to enable CBOE to handle the 
continually increasing volume of market information and to accommodate 
the dissemination of data during Extended Trading Hours.

[[Page 1270]]

    The Exchange believes the proposed increase in the Data Fee for BBO 
data is equitable and not unfairly discriminatory because it would 
apply equally to all Customers. The Exchange believes the proposed Data 
Fee is reasonable because it compares favorably to fees that other 
markets charge for similar products. For example, NASDAQ OMX PHLX 
charges Internal Distributors a monthly fee of $4,000 per organization 
and External Distributors a monthly fee of $5,000 per organization 
(i.e., a total of $9,000 per month for internal use and external 
redistribution) for its ``TOPO Plus Orders'' data feed, which like the 
BBO Data Feed includes top-of-book data (including orders, quotes and 
trades) and other market data.\18\ The International Securities 
Exchange offers a ``Top Quote Feed'', which includes top-of-book data, 
and a separate ``Spread Feed'', which like the BBO Data Feed includes 
order and quote data for complex strategies (i.e., a customer must 
subscribe to both feeds to receive data comparable to the BBO Data 
Feed). ISE charges distributors of its Top Quote Feed a base monthly 
fee of $3,000 plus $20 per month per controlled device. ISE charges 
distributors of its Spread Feed a base monthly fee of $3,000 plus $25 
per month per controlled device.\19\
---------------------------------------------------------------------------

    \18\ See IX. Proprietary Data Feed Fees, TOPO Plus Orders, 
available at https://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing.
    \19\ See ISE Schedule of Fees available at https://www.ise.com/assets/documents/OptionsExchange/legal/fee/ISE_fee_schedule.pdf.
---------------------------------------------------------------------------

    The Exchange believes the proposed increase in the Data Fee for 
Book Depth data is equitable and not unfairly discriminatory because it 
would apply equally to all Customers. The Exchange believes the 
proposed Data Fee is reasonable because it compares favorably to fees 
that other markets charge for similar products. For example, the 
International Securities Exchange offers a ``Depth of Market'' Feed, 
which includes the aggregated volume of all quotes and orders available 
at each of the top five price levels for simple (single legged) 
instruments, and a separate Spread Feed, which like the Book Depth Data 
Feed includes order and quote data for complex strategies (i.e., a 
customer must subscribe to both feeds to receive data comparable to the 
Book Depth Data Feed). ISE charges distributors of its Depth of Market 
Feed a base monthly fee of $5,000 plus $50 per month per controlled 
device. ISE charges distributors of its Spread Feed a base monthly fee 
of $3,000 plus $25 per month per controlled device.\20\ NASDAQ OMX PHLX 
charges Internal Distributors a monthly fee of $4,000 and External 
Distributors a monthly fee of a $4,500 (i.e., a total of $8,500 per 
month for internal use and external redistribution) for its Depth of 
Market data feed that includes full depth of quotes and orders and last 
sale data for options listed on PHLX.\21\
---------------------------------------------------------------------------

    \20\ Supra Note 19.
    \21\ See IX. Proprietary Data Feed Fees, PHLX Depth Data, 
available at https://www.nasdaqtrader.com/Micro.aspx?id=phlxpricing.
---------------------------------------------------------------------------

    The decision of the United States Court of Appeals for the District 
of Columbia Circuit in NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 
2010), upheld reliance by the Securities and Exchange Commission 
(``Commission'') upon the existence of competitive market mechanisms to 
set reasonable and equitably allocated fees for proprietary market 
data:

    In fact, the legislative history indicates that the Congress 
intended that the market system `evolve through the interplay of 
competitive forces as unnecessary regulatory restrictions are 
removed' and that the SEC wield its regulatory power `in those 
situations where competition may not be sufficient,' such as in the 
creation of a `consolidated transactional reporting system.'

Id. At 535 (quoting H.R. Rep. No. 94-229 at 92 (1975), as reprinted in 
1975 U.S.C.C.A.N. 323). The court agreed with the Commission's 
conclusion that ``Congress intended that `competitive forces should 
dictate the services and practices that constitute the U.S. national 
market system for trading equity securities.' ''\22\
---------------------------------------------------------------------------

    \22\ NetCoalition, 615 F.3d at 535 (Quoting Securities Exchange 
Act Release No. 59039 (December 9 [sic], 2008), 73 FR 74770 
(December 9, 2008) at 74771).
---------------------------------------------------------------------------

    As explained below in the Exchange's Statement on Burden on 
Competition, the Exchange believes that there is substantial evidence 
of competition in the marketplace for proprietary market data and that 
the Commission can rely upon such evidence in concluding that the fees 
established in this filing are the product of competition and therefore 
satisfy the relevant statutory standards. In addition, the existence of 
alternatives to these data products, such as consolidated data and 
proprietary data from other sources, as described below, further 
ensures that the Exchange cannot set unreasonable fees, or fees that 
are unreasonably discriminatory, when vendors and subscribers can 
select such alternatives.
    For the reasons cited above, the Exchange believes the proposed 
fees for the BBO and Book Depth Data Feeds are equitable, reasonable 
and not unfairly discriminatory. In addition, the Exchange believes 
that no substantial countervailing basis exists to support a finding 
that the proposed fees for the BBO and Book Depth Data Feeds fail to 
meet the requirements of the Act.

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

    CBOE does not believe that the proposed rule change will impose any 
burden on competition that is not necessary or appropriate in 
furtherance of the purposes of the Act.
    An exchange's ability to price its proprietary data market feed 
products is constrained by (1) the existence of actual competition for 
the sale of such data, (2) the joint product nature of exchange 
platforms, and (3) the existence of alternatives to the Exchange's 
proprietary data.
    The Existence of Actual Competition. The Exchange believes 
competition provides an effective constraint on the market data fees 
that the Exchange, through MDX, has the ability and the incentive to 
charge. CBOE has a compelling need to attract order flow from market 
participants in order to maintain its share of trading volume. This 
compelling need to attract order flow imposes significant pressure on 
CBOE to act reasonably in setting its fees for market data, 
particularly given that the market participants that will pay such fees 
often will be the same market participants from whom CBOE must attract 
order flow. These market participants include broker-dealers that 
control the handling of a large volume of customer and proprietary 
order flow. Given the portability of order flow from one exchange to 
another, any exchange that sought to charge unreasonably high data fees 
would risk alienating many of the same customers on whose orders it 
depends for competitive survival. CBOE currently competes with twelve 
options exchanges (including CBOE's affiliate, C2 Options Exchange) for 
order flow.\23\
---------------------------------------------------------------------------

    \23\ The Commission has previously made a finding that the 
options industry is subject to significant competitive forces. See 
e.g., Securities Exchange Act Release No. 59949 (May 20, 2009), 74 
FR 25593 (May 28, 2009) (SR-ISE-2009-97) (order approving ISE's 
proposal to establish fees for a real-time depth of market data 
offering).
---------------------------------------------------------------------------

    In addition, in the case of products that are distributed through 
market data vendors, the market data vendors themselves provide 
additional price discipline for proprietary data products because they 
control the primary means of access to certain end users. These vendors 
impose price discipline based upon their business models. For example, 
vendors that assess a surcharge on data they sell are able to refuse to 
offer proprietary products that their end users do not or will not

[[Page 1271]]

purchase in sufficient numbers. Internet portals, such as Google, 
impose price discipline by providing only data that they believe will 
enable them to attract ``eyeballs'' that contribute to their 
advertising revenue. Similarly, Customers will not offer the BBO or 
Book Depth Data Feeds unless these products will help them maintain 
current users or attract new ones. For example, a broker-dealer will 
not choose to offer the BBO or Book Depth Data Feeds to its retail 
customers unless the broker-dealer believes that the retail customers 
will use and value the data and the provision of such data will help 
the broker-dealer maintain the customer relationship, which allows the 
broker-dealer to generate profits for itself. Professional users will 
not request any of these feeds from Customers unless they can use the 
data for profit-generating purposes in their businesses. All of these 
operate as constraints on pricing proprietary data products.
    Joint Product Nature of Exchange Platform. Transaction execution 
and proprietary data products are complementary in that market data is 
both an input and a byproduct of the execution service. In fact, market 
data and trade executions are a paradigmatic example of joint products 
with joint costs. The decision whether and on which platform to post an 
order will depend on the attributes of the platforms where the order 
can be posted, including the execution fees, data quality, and price 
and distribution of their data products. The more trade executions a 
platform does, the more valuable its market data products become. 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, an exchange's broker-
dealer customers view the costs of transaction executions and market 
data as a unified cost of doing business with the exchange.
    Analyzing the cost of market data product production and 
distribution in isolation from the cost of all of the inputs supporting 
the creation of market data and market data products will inevitably 
underestimate the cost of the data and data products because it is 
impossible to obtain the data inputs to create market data products 
without a fast, technologically robust, and well-regulated execution 
system, and system costs and regulatory costs affect the price of both 
obtaining the market data itself and creating and distributing market 
data products. It would be equally misleading, however, to attribute 
all of an exchange's costs to the market data portion of an exchange's 
joint products. Rather, all of an exchange's costs are incurred for the 
unified purposes of attracting order flow, executing and/or routing 
orders, and generating and selling data about market activity. The 
total return that an exchange earns reflects the revenues it receives 
from the joint products and the total costs of the joint products.
    The level of competition and contestability in the market is 
evident in the numerous alternative venues that compete for order flow, 
including 12 options self-regulatory organization (``SRO'') markets, as 
well as various forms of alternative trading systems (``ATSs''), 
including dark pools and electronic communication networks (``ECNs'') 
and internalizing broker-dealers (``BDs''). Competition among trading 
platforms can be expected to constrain the aggregate return that 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. For example, 
some platforms may choose to pay rebates to attract orders, charge 
relatively low prices for market data products (or provide market data 
products free of charge), and charge relatively high prices for 
accessing posted liquidity. Other platforms may choose a strategy of 
paying lower rebates (or no rebates) to attract orders, setting 
relatively high prices for market data products, and setting relatively 
low prices for accessing posted liquidity. In this environment, there 
is no economic basis for regulating maximum prices for one of the joint 
products in an industry in which suppliers face competitive constraints 
with regard to the joint offering.
    The Existence of Alternatives. CBOE is constrained in pricing the 
BBO and Book Depth Data Feeds by the availability to market 
participants of alternatives to purchasing these products. CBOE must 
consider the extent to which market participants would choose one or 
more alternatives instead of purchasing the exchange's data. Other 
options exchanges can and have produced their own top-of-book and book 
depth market data products, and thus are sources of potential 
competition for MDX. For example, as noted above, ISE and NASDAQ OMX 
PHLX offer market data products that compete with the BBO and Book 
Depth Data Feeds. The NYSE offers market data products entitled ``NYSE 
ArcaBook for Amex Options'' and ``NYSE ArcaBook for Arca Options'' that 
include top-of-book, last sale and market depth data similar to the 
data in the BBO and Book Depth Data Feeds.
    The large number of SROs, BDs, and ATSs that currently produce 
proprietary data or are currently capable of producing it provides 
further pricing discipline for proprietary data products. Each SRO, 
ATS, and BD is currently permitted to produce proprietary data 
products, and many currently do. In addition, the OPRA data feed is a 
significant competitive alternative to the BBO and last sale data 
included in the BBO and Book Depth Data Feeds.
    Further, data products are valuable to professional users only if 
they can be used for profit-generating purposes in their businesses and 
valuable to non-professional users only insofar as they provide 
information that such users expect will assist them in tracking prices 
and market trends and making trading decisions.
    The existence of numerous alternatives to the Exchange's products, 
including proprietary data from other sources, ensures that the 
Exchange cannot set unreasonable fees, or fees that are unreasonably 
discriminatory, when vendors and subscribers can elect these 
alternatives or choose not to purchase a specific proprietary data 
product if its cost to purchase is not justified by the returns any 
particular vendor or subscriber would achieve through the purchase.

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

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

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

    The foregoing rule change has become effective pursuant to Section 
19(b)(3)(A) of the Act \24\ and paragraph (f) of Rule 19b-4 \25\ 
thereunder. 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

[[Page 1272]]

Commission will institute proceedings to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \24\ 15 U.S.C. 78s(b)(3)(A).
    \25\ 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-CBOE-2015-115 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-CBOE-2015-115. 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-CBOE-2015-115 and should be 
submitted on or before February 1, 2016.

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\26\
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    \26\ 17 CFR 200.30-3(a)(12).
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Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-254 Filed 1-8-16; 8:45 am]
 BILLING CODE 8011-01-P
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