Self-Regulatory Organizations; The NASDAQ Stock Market LLC; Notice of Filing of Proposed Rule Change To Add Nasdaq Rule 7046 (Nasdaq Trading Insights), 52486-52490 [2016-18703]
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Federal Register / Vol. 81, No. 152 / Monday, August 8, 2016 / Notices
secondary market trading in shares does
not involve a Fund as a party and will
not result in dilution of an investment
in shares, and (b) to the extent different
prices exist during a given trading day,
or from day to day, such variances occur
as a result of third-party market forces,
such as supply and demand. Therefore,
applicants assert that secondary market
transactions in shares will not lead to
discrimination or preferential treatment
among purchasers. Finally, applicants
represent that share market prices will
be disciplined by arbitrage
opportunities, which should prevent
shares from trading at a material
discount or premium from NAV.
6. With respect to Funds that effect
creations and redemptions of Creation
Units in kind and that are based on
certain Underlying Indexes that include
foreign securities, applicants request
relief from the requirement imposed by
section 22(e) in order to allow such
Funds to pay redemption proceeds
within fifteen calendar days following
the tender of Creation Units for
redemption. Applicants assert that the
requested relief would not be
inconsistent with the spirit and intent of
section 22(e) to prevent unreasonable,
undisclosed or unforeseen delays in the
actual payment of redemption proceeds.
7. Applicants request an exemption to
permit Funds of Funds to acquire Fund
shares beyond the limits of section
12(d)(1)(A) of the Act; and the Funds,
and any principal underwriter for the
Funds, and/or any broker or dealer
registered under the Securities
Exchange Act of 1934, to sell shares to
Funds of Funds beyond the limits of
section 12(d)(1)(B) of the Act. The
application’s terms and conditions are
designed to, among other things, help
prevent any potential (i) undue
influence over a Fund through control
or voting power, or in connection with
certain services, transactions, and
underwritings, (ii) excessive layering of
fees, and (iii) overly complex fund
structures, which are the concerns
underlying the limits in sections
12(d)(1)(A) and (B) of the Act.
8. Applicants request an exemption
from sections 17(a)(1) and 17(a)(2) of the
Act to permit persons that are Affiliated
Persons, or Second Tier Affiliates, of the
Funds, solely by virtue of certain
ownership interests, to effectuate
purchases and redemptions in-kind. The
deposit procedures for in-kind
purchases of Creation Units and the
redemption procedures for in-kind
redemptions of Creation Units will be
the same for all purchases and
redemptions and Deposit Instruments
and Redemption Instruments will be
valued in the same manner as those
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investment positions currently held by
the Funds. Applicants also seek relief
from the prohibitions on affiliated
transactions in section 17(a) to permit a
Fund to sell its shares to and redeem its
shares from a Fund of Funds, and to
engage in the accompanying in-kind
transactions with the Fund of Funds.3
The purchase of Creation Units by a
Fund of Funds directly from a Fund will
be accomplished in accordance with the
policies of the Fund of Funds and will
be based on the NAVs of the Funds.
9. Applicants also request relief to
permit a Feeder Fund to acquire shares
of another registered investment
company managed by the Adviser
having substantially the same
investment objectives as the Feeder
Fund (‘‘Master Fund’’) beyond the
limitations in section 12(d)(1)(A) and
permit the Master Fund, and any
principal underwriter for the Master
Fund, to sell shares of the Master Fund
to the Feeder Fund beyond the
limitations in section 12(d)(1)(B).
10. Section 6(c) of the Act permits the
Commission to exempt any persons or
transactions from any provision of the
Act if such exemption is necessary or
appropriate in the public interest and
consistent with the protection of
investors and the purposes fairly
intended by the policy and provisions of
the Act. Section 12(d)(1)(J) of the Act
provides that the Commission may
exempt any person, security, or
transaction, or any class or classes of
persons, securities, or transactions, from
any provision of section 12(d)(1) if the
exemption is consistent with the public
interest and the protection of investors.
Section 17(b) of the Act authorizes the
Commission to grant an order
permitting a transaction otherwise
prohibited by section 17(a) if it finds
that (a) the terms of the proposed
transaction are fair and reasonable and
do not involve overreaching on the part
of any person concerned; (b) the
proposed transaction is consistent with
the policies of each registered
investment company involved; and (c)
the proposed transaction is consistent
with the general purposes of the Act.
3 The requested relief would apply to direct sales
of shares in Creation Units by a Fund to a Fund of
Funds and redemptions of those shares. Applicants,
moreover, are not seeking relief from section 17(a)
for, and the requested relief will not apply to,
transactions where a Fund could be deemed an
Affiliated Person, or a Second-Tier Affiliate, of a
Fund of Funds because an Adviser or an entity
controlling, controlled by or under common control
with an Adviser provides investment advisory
services to that Fund of Funds.
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For the Commission, by the Division of
Investment Management, under delegated
authority.
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–18706 Filed 8–5–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–78462; File No. SR–
NASDAQ–2016–101]
Self-Regulatory Organizations; The
NASDAQ Stock Market LLC; Notice of
Filing of Proposed Rule Change To
Add Nasdaq Rule 7046 (Nasdaq
Trading Insights)
August 2, 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 July 26,
2016, 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 Nasdaq. 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
Nasdaq proposes to add Nasdaq Rule
7046 (Nasdaq Trading Insights) to the
Nasdaq rule book.
The text of the proposed rule change
is available at https://
nasdaq.cchwallstreet.com/, at Nasdaq’s
principal office, 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,
Nasdaq 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. Nasdaq has prepared
summaries, set forth in Sections A, B,
and C below, of the most significant
aspects of such statements.
1 15
2 17
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U.S.C. 78s(b)(1).
CFR 240.19b–4.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to add Nasdaq
Rule 7046 (Nasdaq Trading Insights) to
the Nasdaq rule book. The Nasdaq
Trading Insights product is an optional
market data service comprised of four
distinct market data components.
Specifically, and as described in greater
detail below, the market data
components include: (a) Missed
Opportunity—Liquidity; (b) Missed
Opportunity—Latency; (c) Peer
Benchmarking; and (d) Liquidity
Dynamics Analysis. Market participants
may opt to choose to receive any or all
of the market data components and the
corresponding fee will be assessed
based on the number of components
selected.3
Currently, Nasdaq provides real-time
prices and analytics in the marketplace.
The Exchange believes that the
additional data points from the
matching engine outlined below may
help market participants to gain a better
understanding about their interactions
with the Exchange. The four optional
market data components that comprise
the Nasdaq Trading Insights product
will help market participants by
providing them with a chance to learn
more about when they may have better
opportunities to access liquidity and to
receive better execution rates. The
proposed market data product will
increase transparency and democratize
information so that all firms that
themselves may not have the expertise
to generate such information may elect
to subscribe to one or all of the
components of the Nasdaq Trading
Insights product. None of the
components are real-time market data
products.
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(a) Missed Opportunity—Liquidity
Trading firms may seek to submit
orders for the greatest number of shares
possible without exceeding the amount
of shares actually available. This
component identifies when an order
from a market participant might have
been increased in size and thus
executed more shares.4
3 A separate filing will address the pricing for the
Nasdaq Trading Insights product, which also will
be implemented on September 1, 2016, if approved
by the SEC.
4 The data elements for this component, in
summary, are the: (i) Issue (Nasdaq symbol for the
issue); (ii) Buy/Sell Indicator (side of the market at
which the market participants are quoting); (iii)
Price (the price (inclusive of decimal point) at
which Nasdaq Market Center market participants
had order interest for the given security at the given
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For example, if a firm sends in an
order that was fully executed and
subsequently sends another order (or
multiple orders) at the same or inferior
price-level than originally executed, this
indicates that they could have oversized
their original order. This missed
opportunity could have resulted in a
larger fill which will allow firms to
change their trading patterns to trade
more efficiently. The Exchange will
provide this information to firms on a T
+ 1 basis. The Missed Opportunity—
Liquidity component may also benefit
firms by providing greater visibility into
exactly what was missed in trading so
they may optimize their models and
trading patterns to yield better returns.
The data included in this component
is unique for each market participant’s
port and only that market participant is
eligible to receive this data upon
voluntarily opting to pay the
corresponding fee (as previously noted,
the corresponding fees will be included
in a future filing). The Exchange will
ensure that each market participant
receives only their own unique data and
will not be able to obtain any other
market participant’s unique data.
Market participants may already be
able to derive the same data that is
provided by this component based on
their executions and algorithms that
they have created. As more firms create
increasingly sophisticated algorithms,
they are able to determine where hidden
pockets of liquidity exist. With this
component, the Exchange is providing
the information necessary for market
participants interested in gaining insight
into hidden pockets of liquidity and
potentially improving their trading
performance. For example, if a firm
continuously executes against hidden
orders and creates a model to
potentially identify the amount of
hidden liquidity for individual
securities at certain time periods, it will
be able to essentially recreate this
product for itself.
(b) Missed Opportunity—Latency
Market participants generally would
use liquidity accessing orders if there is
a high probability that it will execute an
order resting on the Exchange order
book. This component identifies by how
much time an order that may have been
marketable missed executing.5 As with
time); (iv) Order Reference Number (the unique
reference number assigned to the new order at the
time of receipt); (v) Order Entry Time Stamp (the
time order was received in the system); (vi) Share
Quantity (total number of shares submitted on
original order); and (vii) Missed Opportunity
Quantity (total number of shares missed).
5 The data elements for this component, in
summary, are the: (i) Issue (Nasdaq symbol for the
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the Missed Opportunity—Liquidity
component described above, this
component also will provide greater
visibility into exactly what was missed
in trading so market participants may
optimize their models and trading
patterns to yield better execution
results. No specific information about
resting orders on the Exchange book
will be provided.
This component will help market
participants to better understand by
how much time they missed specific
orders, thus determining whether they
want to invest in the technology to
mitigate the misses. For example, if a
market participant sends in a
marketable order, but an order resting
on the Exchange order book was
subsequently canceled or executed, the
Exchange will let the market participant
know for each of these orders submitted
by how much time they missed an
execution. The Exchange will provide
this information to firms on a T + 1
basis.
Additionally, the data included in
this component will be based only on
the data of the market participant that
opts to pay the corresponding fee to
receive it (as previously noted, the
corresponding fees will be included in
a future filing). The Exchange will
restrict all other market participants
from receiving another market
participant’s data.
(c) Peer Benchmarking
This component ranks the quality of
a market participant’s trading
performance against its peers.6 Market
issue); (ii) Buy/Sell Indicator (side of the market at
which the market participants are quoting); (iii)
Price (the price (inclusive of decimal point) at
which Nasdaq Market Center market participants
had order interest for the given security at the given
time); (iv) Order Reference Number (the unique
reference number assigned to the new order at the
time of receipt); (v) Order Size; (vi) Matching
Engine times for incoming orders; (vii) Missed
Opportunity times; and (viii) Reasons for not getting
fills.
6 The data elements for this component, in
summary, include: (i) Total Dollar Volume; (ii)
Total Share Volume, Share Volume of Liquidity
Provision and Accessible for Tape A, Tape B and
Tape C; (iii) Number of Trades, including Hidden
Orders and Number of Hidden Trades; (iv) Mean/
Median Trade Size; (v) Mean/Median Size of
Hidden Orders; (vi) Number of Buy/Sell Orders
Received; (vii) Number of Aggressive Orders, Mean
Size of Aggressive Buy/Sell Orders; (viii) Number
of Passive Orders, Mean Size of Displayed Passive
Order, Hidden Passive for Buy and Sell Orders; (ix)
Number of Orders at Best Bid/Ask Level; (x) Mean
Cost to Execute for Buy and Sell for 1000, 5000,
10000 Shares; (xi) Number of Modified/Cancelled
Buy/Sell Orders; (xii) Mean Buy/Sell Price Range;
(xiii) Total Number of Buy/Sell Price; (xiv) Number,
Mean—Resting Buy/Sell Price Points; (xv) Missed
Opportunities—Liquidity, Latency; (xvi) Mean
Share Volume Against Hidden, Mean Quote
Rotation Time.
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participants will be able to view their
own trading activity broken out by port
with each being ranked independently
for each metric against their peers
trading with the Exchange. By
understanding its ranking and its
associated ranking with peers, market
participants will have a better idea of
how the competition is performing vis`
a-vis their own trading.
Peer Benchmarking will help market
participants better understand trending
over time and whether behavioral
changes they make translate into the
expected results. Additionally, this
component will assist market
participants in understanding their
rankings independent of any trading
pattern changes the market participant
may have made. It will let market
participants know what their metric is
ranked within their peer group and the
market participant can glean how it is
changing over time. Each port will be
categorized into a peer grouping that
will be based upon a given set of metrics
that will share similar trading behavior
characteristics and must include at least
ten peers within a security. The
Exchange will provide this information
to firms on a T + 1 basis.
The data included in Peer
Benchmarking is specific to a particular
market participant’s port and only the
market participant who pays the
optional fee to receive the component is
eligible to receive Peer Benchmarking.
Nasdaq will restrict all other market
participants from receiving this market
participant’s Peer Benchmark (as
previously noted, the corresponding
fees will be included in a future filing).
(d) Liquidity Dynamics Analysis
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This component offers extensive
historical insight into aggregated
displayed and hidden orders on the
Exchange for Reg NMS securities listed
on Nasdaq, the New York Stock
Exchange, and other U.S. equity
exchanges. Specifically, this component
will contain aggregated metrics and
statistics about the liquidity on Nasdaq,
including hidden liquidity on a security
level.7 This will be presented as an
7 The data elements for this component, in
summary, are the: (i) Issue (Nasdaq symbol for the
issue); (ii) Start Time; (iii) End Time; (iv) Side
(identifies buy vs. sell side); (v) Level (level
associated with the price); (vi) Average Depth
(average depth of the book); (vii) Minimum Depth
(minimum depth of the book); (viii) Maximum
Depth (maximum depth of the book); (ix) Standard
Deviation Depth; (x) Average Price; (xi) Minimum
Price (minimum price in the book); (xii) Maximum
Price (maximum price in the book); (xiii) Median
Price (median price in the book); (xiv) Standard
Deviation—Price; (xv) Minimum Distance from the
QBBO; (xvi) Maximum Distance from the QBBO;
(xvii) Mean Distance from the QBBO; (xviii) Median
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FTP 8 file with calculated statistics over
a time window of 30 seconds, subject to
change. The data will be analyzed every
30 seconds starting at 10 minutes prior
to the market open and 10 minutes after
the market close and it will include all
orders that are visible, anonymous or
non-displayed for each security. The
Exchange will provide this information
to firms on a T + 1 basis.
Market participants may opt to utilize
this component to better understand
when pockets of accessible liquidity
exist. This may help market participants
optimize their algorithm and Smart
Order Router to potentially oversize
orders and get better fill rates.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,9
in general and with Sections 6(b)(5) of
the Act,10 in particular in that it is
designed to prevent fraudulent and
manipulative acts and practices, to
promote just and equitable principles of
trade, to foster cooperation and
coordination with persons engaged in
regulating, clearing, settling, processing
information with respect to, and
facilitating transactions in securities, to
remove impediments to and perfect the
mechanism of a free and open market
and a national market system, and, in
general, to protect investors and the
public interest. This proposal is in
keeping with those principles in that it
promotes increased transparency
through the dissemination of the
optional Nasdaq Trading Insights
market data product to those interested
in paying to receive any or all of the
four distinct market data components
comprising the product.
The Exchange also believes this
proposal is consistent with Section
6(b)(5) of the Act because it protects
investors and the public interest and
promotes just and equitable principles
of trade by providing investors with
new options for receiving market data as
requested by potential purchasers. The
proposed rule change would benefit
investors by facilitating their prompt
access to the value added information
that is included in the Nasdaq Trading
Insights market data product, which
includes the following components: (a)
Missed Opportunity—Liquidity; (b)
Missed Opportunity—Latency; (c) Peer
Distance from the QBBO; and (xix) Standard
Deviation—Distance from QBBO.
8 FTP means a File Transfer Protocol, which is a
standard network protocol used to transfer
computer files between a client and server on a
computer network.
9 15 U.S.C. 78f.
10 15 U.S.C. 78f(b)(5).
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Benchmarking; and (d) Liquidity
Dynamics Analysis.
In adopting Regulation NMS, the
Commission granted self-regulatory
organizations (‘‘SROs’’) and broker
dealers increased authority and
flexibility to offer new and unique
market data to consumers of such data.
It was believed that this authority would
expand the amount of data available to
users and consumers of such data and
also spur innovation and competition
for the provision of market data. The
Exchange believes that the Nasdaq
Trading Insights product is the sort of
market data product that the
Commission envisioned when it
adopted Regulation NMS.
The Commission concluded that
Regulation NMS—by deregulating the
market in proprietary data—would itself
further the Act’s goals of facilitating
efficiency and competition:
[E]fficiency is promoted when brokerdealers who do not need the data beyond the
prices, sizes, market center identifications of
the NBBO and consolidated last sale
information are not required to receive (and
pay for) such data. The Commission also
believes that efficiency is promoted when
broker-dealers may choose to receive (and
pay for) additional market data based on their
own internal analysis of the need for such
data.11
By removing ‘‘unnecessary regulatory
restrictions’’ on the ability of exchanges
to sell their own data, Regulation NMS
advanced the goals of the Act and the
principles reflected in its legislative
history. This proposed new market data
product provides investors with new
options for receiving market data, which
was a primary goal of the market data
amendments adopted by Regulation
NMS.12
(a) Missed Opportunity—Liquidity
This component is designed for
trading firms that seek to submit orders
for the greatest number of shares
possible without exceeding the amount
of shares actually available. It identifies
when an order from a market participant
might have been increased in size and
thus executed more shares.
The Exchange believes that providing
this optional liquidity to interested
market participants for a fee is
consistent with facilitating transactions
in securities, 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
11 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37496 (June 29, 2005)
(‘‘Regulation NMS Adopting Release’’).
12 See Regulation NMS Adopting Release, supra,
at 37503.
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because it provides greater visibility
into exactly what was missed in trading
so market participants may optimize
their models and trading patterns to
yield better execution results by
identifying when an order from a market
participant might have been increased
in size and thus executed more shares.
(b) Missed Opportunity—Latency
This component is designed for
market participants that are interested
in gaining insight into latency in
connection with orders that failed to
execute against an order resting on the
Exchange order book since it identifies
by how much time an order that may
have been marketable missed executing.
The Exchange believes that providing
this optional latency data to interested
market participants for a fee is
consistent with facilitating transactions
in securities, 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
because it provides greater visibility
into exactly what was missed in trading
so market participants may optimize
their models and trading patterns to
yield better execution results by
identifying by how much time an order
that may have been marketable missed
executing.
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(c) Peer Benchmarking
This component is designed for
market participants that are interested
in gaining insight into the quality of its
trading performance against its peers
trading with the Exchange.
The Exchange believes that providing
this optional Peer Benchmarking data to
interested market participants for a fee
is consistent with facilitating
transactions in securities, to 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 because it provides
additional insight for market
participants into how the competition is
`
performing vis-a-vis their own trading,
as well as helping market participants
better understand trending over time
and whether behavioral changes they
make translate into the expected results.
(d) Liquidity Dynamics Analysis
This component is designed for
market participants that are interested
in gaining insight into when pockets of
accessible liquidity exist. This
component may help market
participants optimize their algorithm
and Smart Order Routers to potentially
oversize orders and get better fill rates.
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The Exchange believes that providing
this optional data concerning historical
insight into aggregated displayed and
hidden orders on the Exchange for Reg
NMS securities listed on Nasdaq, the
New York Stock Exchange, and other
U.S. equity exchanges, to interested
market participants for a fee is
consistent with facilitating transactions
in securities, 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
because it provides greater visibility
into when pockets of accessible
liquidity exist. This, in turn, may help
market participants optimize their
algorithm and Smart Order Routers to
potentially oversize orders and get
better fill rates.
In summary, the Nasdaq Trading
Insights market data product will help
to protect a free and open market by
providing additional non-core data
(offered on an optional basis for a fee)
to the marketplace and by providing
investors with greater choices.13
Additionally, the proposal would not
permit unfair discrimination because
each component of the product will be
available to all of the Exchange’s
participants.
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.
In fact, the Exchange believes that the
Nasdaq Trading Insights market data
product will enhance competition 14 by
providing new options for receiving
market data to market participants,
which was a primary goal of the market
data amendments adopted by
Regulation NMS.15
The market for proprietary data
products is also highly contestable
because market entry is rapid,
inexpensive, and profitable. The history
of electronic trading is replete with
examples of entrants that swiftly grew
into some of the largest electronic
trading platforms and proprietary data
producers: Archipelago, Bloomberg
Tradebook, Island, RediBook, Attain,
TracECN, BATS Trading and BATS/
Direct Edge. A proliferation of dark
13 See
Sec. Indus. Fin. Mkts. Ass’n (SIFMA),
Initial Decision Release No. 1015, 2016 SEC LEXIS
2278 (ALJ June 1, 2016) (finding the existence of
vigorous competition with respect to non-core
market data).
14 Id.
15 See Regulation NMS Adopting Release, supra,
at 37503.
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52489
pools and other ATSs operate profitably
with fragmentary shares of consolidated
market volume.
Regulation NMS, by deregulating the
market for proprietary data, has
increased the contestability of that
market. While broker-dealers (‘‘BDs’’)
have previously published their
proprietary data individually,
Regulation NMS encourages market data
vendors and BDs to produce proprietary
products cooperatively in a manner
never before possible. Multiple market
data vendors already have the capability
to aggregate data and disseminate it on
a profitable scale, including Bloomberg
and Thomson Reuters. In Europe,
Cinnober aggregates and disseminates
data from over 40 brokers and
multilateral trading facilities.16
In the case of TRFs, the rapid entry of
several exchanges into this space in
2006–2007 following the development
and Commission approval of the TRF
structure demonstrates the
contestability of this aspect of the
market.17 Given the demand for trade
reporting services that is itself a byproduct of the fierce competition for
transaction executions—characterized
notably by a proliferation of ATSs and
BDs offering internalization—any supracompetitive increase in the fees
associated with trade reporting or TRF
data would shift trade report volumes
from one of the existing TRFs to the
other 18 and create incentives for other
TRF operators to enter the space.
Alternatively, because BDs reporting to
TRFs are themselves free to consolidate
the market data that they report, the
market for over-the-counter data itself,
separate and apart from the markets for
execution and trade reporting services—
is fully contestable.
In this instance, the proposed rule
change to offer the optional four
components that comprise the Nasdaq
Trading Insights market data product for
a fee is subject to market participant
interest. Additionally, some market
participants may already be able to
derive the same data that is provided by
this component based on their
executions and algorithms that they
have created.
In sum, if the four distinct market
data components that comprise the
Nasdaq Trading Insights product and
that are the subject of the rule change
16 See https://www.cinnober.com/boat-tradereporting.
17 The low cost exit of two TRFs from the market
is also evidence of a contestable market, because
new entrants are reluctant to enter a market where
exit may involve substantial shut-down costs.
18 It should be noted that the FINRA/NYSE TRF
has, in recent weeks, received reports for almost
10% of all over-the-counter volume in NMS stocks.
E:\FR\FM\08AUN1.SGM
08AUN1
52490
Federal Register / Vol. 81, No. 152 / Monday, August 8, 2016 / Notices
proposed herein are unattractive to
market participants, market participants
will opt not to purchase any of the four
components. Accordingly, the Exchange
does not believe that the proposed
change will impair the ability of
members or competing order execution
venues to maintain their competitive
standing in the financial markets.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
Written comments were neither
solicited nor received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of
publication of this notice in the Federal
Register or within such longer period
up to 90 days (i) as the Commission may
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) By order approve or disapprove
such proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be 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 DSK3G9T082PROD 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–
NASDAQ–2016–101 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Brent J. Fields, Secretary, Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NASDAQ–2016–101. 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
VerDate Sep<11>2014
22:23 Aug 05, 2016
Jkt 238001
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–2016–101 and should be
submitted on or before August 29, 2016.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.19
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016–18703 Filed 8–5–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Investment Company Act Release No.
32201; 812–14585]
Managed Portfolio Series and Port
Street Investments, LLC; Notice of
Application
August 2, 2016.
Securities and Exchange
Commission (‘‘Commission’’).
ACTION: Notice of an application under
section 6(c) of the Investment Company
Act of 1940 (‘‘Act’’) for an exemption
from section 15(a) of the Act and rule
18f–2 under the Act, as well as from
certain disclosure requirements in rule
20a–1 under the Act, Item 19(a)(3) of
Form N–1A, Items 22(c)(1)(ii),
22(c)(1)(iii), 22(c)(8) and 22(c)(9) of
Schedule 14A under the Securities
Exchange Act of 1934, and sections 6–
07(2)(a), (b), and (c) of Regulation S–X
(‘‘Disclosure Requirements’’). The
requested exemption would permit an
investment adviser to hire and replace
certain subadvisers without shareholder
approval and grant relief from the
AGENCY:
19 17
PO 00000
CFR 200.30–3(a)(12).
Frm 00094
Fmt 4703
Sfmt 4703
Disclosure Requirements as they relate
to fees paid to the subadvisers.
Managed Portfolio Series
(the ‘‘Trust’’), a Delaware statutory trust
registered under the Act as an open-end
management investment company, and
Port Street Investments, LLC (the
‘‘Initial Adviser’’), a California limited
liability company registered as an
investment adviser under the
Investment Advisers Act of 1940, on
behalf of each series of the Trust that is
a Fund (as defined below) (collectively,
with the Trust and the Initial Adviser,
the ‘‘Applicants’’).
APPLICANTS:
Filing Dates: The application was
filed on December 8, 2015 and amended
on May 3, 2016.
DATES:
HEARING OR NOTIFICATION OF HEARING:
An order granting the application will
be issued unless the Commission orders
a hearing. Interested persons may
request a hearing by writing to the
Commission’s Secretary and serving
applicants with a copy of the request,
personally or by mail. Hearing requests
should be received by the Commission
by 5:30 p.m. on August 29, 2016, and
should be accompanied by proof of
service on the applicants, in the form of
an affidavit or, for lawyers, a certificate
of service. Pursuant to rule 0–5 under
the Act, hearing requests should state
the nature of the writer’s interest, any
facts bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
writing to the Commission’s Secretary.
Secretary, U.S. Securities
and Exchange Commission, 100 F Street
NE., Washington, DC 20549–1090.
Applicants: Jeanine M. Bajczyk, Esq.,
Managed Portfolio Series, 615 East
Michigan Street, Milwaukee, WI 53202;
Graham B. Pierce, Port Street
Investments, LLC, 24 Corporate Plaza,
Suite 150, Newport Beach, CA 92660.
ADDRESSES:
FOR FURTHER INFORMATION CONTACT:
Deepak T. Pai, Senior Counsel, at (202)
551–6876, or Mary Kay Frech, Branch
Chief, at (202) 551–6814 (Division of
Investment Management, Chief
Counsel’s Office).
The
following is a summary of the
application. The complete application
may be obtained via the Commission’s
Web site by searching for the file
number, or an applicant using the
Company name box, at https://
www.sec.gov/search/search.htm or by
calling (202) 551–8090.
SUPPLEMENTARY INFORMATION:
E:\FR\FM\08AUN1.SGM
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Agencies
[Federal Register Volume 81, Number 152 (Monday, August 8, 2016)]
[Notices]
[Pages 52486-52490]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-18703]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-78462; File No. SR-NASDAQ-2016-101]
Self-Regulatory Organizations; The NASDAQ Stock Market LLC;
Notice of Filing of Proposed Rule Change To Add Nasdaq Rule 7046
(Nasdaq Trading Insights)
August 2, 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 July 26, 2016, 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 Nasdaq. 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
Nasdaq proposes to add Nasdaq Rule 7046 (Nasdaq Trading Insights)
to the Nasdaq rule book.
The text of the proposed rule change is available at https://nasdaq.cchwallstreet.com/, at Nasdaq's principal office, 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, Nasdaq 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. Nasdaq has prepared summaries, set forth in Sections A,
B, and C below, of the most significant aspects of such statements.
[[Page 52487]]
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to add Nasdaq Rule 7046 (Nasdaq Trading
Insights) to the Nasdaq rule book. The Nasdaq Trading Insights product
is an optional market data service comprised of four distinct market
data components. Specifically, and as described in greater detail
below, the market data components include: (a) Missed Opportunity--
Liquidity; (b) Missed Opportunity--Latency; (c) Peer Benchmarking; and
(d) Liquidity Dynamics Analysis. Market participants may opt to choose
to receive any or all of the market data components and the
corresponding fee will be assessed based on the number of components
selected.\3\
---------------------------------------------------------------------------
\3\ A separate filing will address the pricing for the Nasdaq
Trading Insights product, which also will be implemented on
September 1, 2016, if approved by the SEC.
---------------------------------------------------------------------------
Currently, Nasdaq provides real-time prices and analytics in the
marketplace. The Exchange believes that the additional data points from
the matching engine outlined below may help market participants to gain
a better understanding about their interactions with the Exchange. The
four optional market data components that comprise the Nasdaq Trading
Insights product will help market participants by providing them with a
chance to learn more about when they may have better opportunities to
access liquidity and to receive better execution rates. The proposed
market data product will increase transparency and democratize
information so that all firms that themselves may not have the
expertise to generate such information may elect to subscribe to one or
all of the components of the Nasdaq Trading Insights product. None of
the components are real-time market data products.
(a) Missed Opportunity--Liquidity
Trading firms may seek to submit orders for the greatest number of
shares possible without exceeding the amount of shares actually
available. This component identifies when an order from a market
participant might have been increased in size and thus executed more
shares.\4\
---------------------------------------------------------------------------
\4\ The data elements for this component, in summary, are the:
(i) Issue (Nasdaq symbol for the issue); (ii) Buy/Sell Indicator
(side of the market at which the market participants are quoting);
(iii) Price (the price (inclusive of decimal point) at which Nasdaq
Market Center market participants had order interest for the given
security at the given time); (iv) Order Reference Number (the unique
reference number assigned to the new order at the time of receipt);
(v) Order Entry Time Stamp (the time order was received in the
system); (vi) Share Quantity (total number of shares submitted on
original order); and (vii) Missed Opportunity Quantity (total number
of shares missed).
---------------------------------------------------------------------------
For example, if a firm sends in an order that was fully executed
and subsequently sends another order (or multiple orders) at the same
or inferior price-level than originally executed, this indicates that
they could have oversized their original order. This missed opportunity
could have resulted in a larger fill which will allow firms to change
their trading patterns to trade more efficiently. The Exchange will
provide this information to firms on a T + 1 basis. The Missed
Opportunity--Liquidity component may also benefit firms by providing
greater visibility into exactly what was missed in trading so they may
optimize their models and trading patterns to yield better returns.
The data included in this component is unique for each market
participant's port and only that market participant is eligible to
receive this data upon voluntarily opting to pay the corresponding fee
(as previously noted, the corresponding fees will be included in a
future filing). The Exchange will ensure that each market participant
receives only their own unique data and will not be able to obtain any
other market participant's unique data.
Market participants may already be able to derive the same data
that is provided by this component based on their executions and
algorithms that they have created. As more firms create increasingly
sophisticated algorithms, they are able to determine where hidden
pockets of liquidity exist. With this component, the Exchange is
providing the information necessary for market participants interested
in gaining insight into hidden pockets of liquidity and potentially
improving their trading performance. For example, if a firm
continuously executes against hidden orders and creates a model to
potentially identify the amount of hidden liquidity for individual
securities at certain time periods, it will be able to essentially
recreate this product for itself.
(b) Missed Opportunity--Latency
Market participants generally would use liquidity accessing orders
if there is a high probability that it will execute an order resting on
the Exchange order book. This component identifies by how much time an
order that may have been marketable missed executing.\5\ As with the
Missed Opportunity--Liquidity component described above, this component
also will provide greater visibility into exactly what was missed in
trading so market participants may optimize their models and trading
patterns to yield better execution results. No specific information
about resting orders on the Exchange book will be provided.
---------------------------------------------------------------------------
\5\ The data elements for this component, in summary, are the:
(i) Issue (Nasdaq symbol for the issue); (ii) Buy/Sell Indicator
(side of the market at which the market participants are quoting);
(iii) Price (the price (inclusive of decimal point) at which Nasdaq
Market Center market participants had order interest for the given
security at the given time); (iv) Order Reference Number (the unique
reference number assigned to the new order at the time of receipt);
(v) Order Size; (vi) Matching Engine times for incoming orders;
(vii) Missed Opportunity times; and (viii) Reasons for not getting
fills.
---------------------------------------------------------------------------
This component will help market participants to better understand
by how much time they missed specific orders, thus determining whether
they want to invest in the technology to mitigate the misses. For
example, if a market participant sends in a marketable order, but an
order resting on the Exchange order book was subsequently canceled or
executed, the Exchange will let the market participant know for each of
these orders submitted by how much time they missed an execution. The
Exchange will provide this information to firms on a T + 1 basis.
Additionally, the data included in this component will be based
only on the data of the market participant that opts to pay the
corresponding fee to receive it (as previously noted, the corresponding
fees will be included in a future filing). The Exchange will restrict
all other market participants from receiving another market
participant's data.
(c) Peer Benchmarking
This component ranks the quality of a market participant's trading
performance against its peers.\6\ Market
[[Page 52488]]
participants will be able to view their own trading activity broken out
by port with each being ranked independently for each metric against
their peers trading with the Exchange. By understanding its ranking and
its associated ranking with peers, market participants will have a
better idea of how the competition is performing vis-[agrave]-vis their
own trading.
---------------------------------------------------------------------------
\6\ The data elements for this component, in summary, include:
(i) Total Dollar Volume; (ii) Total Share Volume, Share Volume of
Liquidity Provision and Accessible for Tape A, Tape B and Tape C;
(iii) Number of Trades, including Hidden Orders and Number of Hidden
Trades; (iv) Mean/Median Trade Size; (v) Mean/Median Size of Hidden
Orders; (vi) Number of Buy/Sell Orders Received; (vii) Number of
Aggressive Orders, Mean Size of Aggressive Buy/Sell Orders; (viii)
Number of Passive Orders, Mean Size of Displayed Passive Order,
Hidden Passive for Buy and Sell Orders; (ix) Number of Orders at
Best Bid/Ask Level; (x) Mean Cost to Execute for Buy and Sell for
1000, 5000, 10000 Shares; (xi) Number of Modified/Cancelled Buy/Sell
Orders; (xii) Mean Buy/Sell Price Range; (xiii) Total Number of Buy/
Sell Price; (xiv) Number, Mean--Resting Buy/Sell Price Points; (xv)
Missed Opportunities--Liquidity, Latency; (xvi) Mean Share Volume
Against Hidden, Mean Quote Rotation Time.
---------------------------------------------------------------------------
Peer Benchmarking will help market participants better understand
trending over time and whether behavioral changes they make translate
into the expected results. Additionally, this component will assist
market participants in understanding their rankings independent of any
trading pattern changes the market participant may have made. It will
let market participants know what their metric is ranked within their
peer group and the market participant can glean how it is changing over
time. Each port will be categorized into a peer grouping that will be
based upon a given set of metrics that will share similar trading
behavior characteristics and must include at least ten peers within a
security. The Exchange will provide this information to firms on a T +
1 basis.
The data included in Peer Benchmarking is specific to a particular
market participant's port and only the market participant who pays the
optional fee to receive the component is eligible to receive Peer
Benchmarking. Nasdaq will restrict all other market participants from
receiving this market participant's Peer Benchmark (as previously
noted, the corresponding fees will be included in a future filing).
(d) Liquidity Dynamics Analysis
This component offers extensive historical insight into aggregated
displayed and hidden orders on the Exchange for Reg NMS securities
listed on Nasdaq, the New York Stock Exchange, and other U.S. equity
exchanges. Specifically, this component will contain aggregated metrics
and statistics about the liquidity on Nasdaq, including hidden
liquidity on a security level.\7\ This will be presented as an FTP \8\
file with calculated statistics over a time window of 30 seconds,
subject to change. The data will be analyzed every 30 seconds starting
at 10 minutes prior to the market open and 10 minutes after the market
close and it will include all orders that are visible, anonymous or
non-displayed for each security. The Exchange will provide this
information to firms on a T + 1 basis.
---------------------------------------------------------------------------
\7\ The data elements for this component, in summary, are the:
(i) Issue (Nasdaq symbol for the issue); (ii) Start Time; (iii) End
Time; (iv) Side (identifies buy vs. sell side); (v) Level (level
associated with the price); (vi) Average Depth (average depth of the
book); (vii) Minimum Depth (minimum depth of the book); (viii)
Maximum Depth (maximum depth of the book); (ix) Standard Deviation
Depth; (x) Average Price; (xi) Minimum Price (minimum price in the
book); (xii) Maximum Price (maximum price in the book); (xiii)
Median Price (median price in the book); (xiv) Standard Deviation--
Price; (xv) Minimum Distance from the QBBO; (xvi) Maximum Distance
from the QBBO; (xvii) Mean Distance from the QBBO; (xviii) Median
Distance from the QBBO; and (xix) Standard Deviation--Distance from
QBBO.
\8\ FTP means a File Transfer Protocol, which is a standard
network protocol used to transfer computer files between a client
and server on a computer network.
---------------------------------------------------------------------------
Market participants may opt to utilize this component to better
understand when pockets of accessible liquidity exist. This may help
market participants optimize their algorithm and Smart Order Router to
potentially oversize orders and get better fill rates.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\9\ in general and with
Sections 6(b)(5) of the Act,\10\ in particular in that it is designed
to prevent fraudulent and manipulative acts and practices, to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to and perfect the mechanism of a
free and open market and a national market system, and, in general, to
protect investors and the public interest. This proposal is in keeping
with those principles in that it promotes increased transparency
through the dissemination of the optional Nasdaq Trading Insights
market data product to those interested in paying to receive any or all
of the four distinct market data components comprising the product.
---------------------------------------------------------------------------
\9\ 15 U.S.C. 78f.
\10\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
The Exchange also believes this proposal is consistent with Section
6(b)(5) of the Act because it protects investors and the public
interest and promotes just and equitable principles of trade by
providing investors with new options for receiving market data as
requested by potential purchasers. The proposed rule change would
benefit investors by facilitating their prompt access to the value
added information that is included in the Nasdaq Trading Insights
market data product, which includes the following components: (a)
Missed Opportunity--Liquidity; (b) Missed Opportunity--Latency; (c)
Peer Benchmarking; and (d) Liquidity Dynamics Analysis.
In adopting Regulation NMS, the Commission granted self-regulatory
organizations (``SROs'') and broker dealers increased authority and
flexibility to offer new and unique market data to consumers of such
data. It was believed that this authority would expand the amount of
data available to users and consumers of such data and also spur
innovation and competition for the provision of market data. The
Exchange believes that the Nasdaq Trading Insights product is the sort
of market data product that the Commission envisioned when it adopted
Regulation NMS.
The Commission concluded that Regulation NMS--by deregulating the
market in proprietary data--would itself further the Act's goals of
facilitating efficiency and competition:
[E]fficiency is promoted when broker-dealers who do not need the
data beyond the prices, sizes, market center identifications of the
NBBO and consolidated last sale information are not required to
receive (and pay for) such data. The Commission also believes that
efficiency is promoted when broker-dealers may choose to receive
(and pay for) additional market data based on their own internal
analysis of the need for such data.\11\
---------------------------------------------------------------------------
\11\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37496 (June 29, 2005) (``Regulation NMS Adopting
Release'').
By removing ``unnecessary regulatory restrictions'' on the ability
of exchanges to sell their own data, Regulation NMS advanced the goals
of the Act and the principles reflected in its legislative history.
This proposed new market data product provides investors with new
options for receiving market data, which was a primary goal of the
market data amendments adopted by Regulation NMS.\12\
---------------------------------------------------------------------------
\12\ See Regulation NMS Adopting Release, supra, at 37503.
---------------------------------------------------------------------------
(a) Missed Opportunity--Liquidity
This component is designed for trading firms that seek to submit
orders for the greatest number of shares possible without exceeding the
amount of shares actually available. It identifies when an order from a
market participant might have been increased in size and thus executed
more shares.
The Exchange believes that providing this optional liquidity to
interested market participants for a fee is consistent with
facilitating transactions in securities, 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
[[Page 52489]]
because it provides greater visibility into exactly what was missed in
trading so market participants may optimize their models and trading
patterns to yield better execution results by identifying when an order
from a market participant might have been increased in size and thus
executed more shares.
(b) Missed Opportunity--Latency
This component is designed for market participants that are
interested in gaining insight into latency in connection with orders
that failed to execute against an order resting on the Exchange order
book since it identifies by how much time an order that may have been
marketable missed executing.
The Exchange believes that providing this optional latency data to
interested market participants for a fee is consistent with
facilitating transactions in securities, 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 because it provides greater visibility into exactly what was
missed in trading so market participants may optimize their models and
trading patterns to yield better execution results by identifying by
how much time an order that may have been marketable missed executing.
(c) Peer Benchmarking
This component is designed for market participants that are
interested in gaining insight into the quality of its trading
performance against its peers trading with the Exchange.
The Exchange believes that providing this optional Peer
Benchmarking data to interested market participants for a fee is
consistent with facilitating transactions in securities, to 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 because it provides additional insight for market
participants into how the competition is performing vis-[agrave]-vis
their own trading, as well as helping market participants better
understand trending over time and whether behavioral changes they make
translate into the expected results.
(d) Liquidity Dynamics Analysis
This component is designed for market participants that are
interested in gaining insight into when pockets of accessible liquidity
exist. This component may help market participants optimize their
algorithm and Smart Order Routers to potentially oversize orders and
get better fill rates.
The Exchange believes that providing this optional data concerning
historical insight into aggregated displayed and hidden orders on the
Exchange for Reg NMS securities listed on Nasdaq, the New York Stock
Exchange, and other U.S. equity exchanges, to interested market
participants for a fee is consistent with facilitating transactions in
securities, 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 because it provides
greater visibility into when pockets of accessible liquidity exist.
This, in turn, may help market participants optimize their algorithm
and Smart Order Routers to potentially oversize orders and get better
fill rates.
In summary, the Nasdaq Trading Insights market data product will
help to protect a free and open market by providing additional non-core
data (offered on an optional basis for a fee) to the marketplace and by
providing investors with greater choices.\13\ Additionally, the
proposal would not permit unfair discrimination because each component
of the product will be available to all of the Exchange's participants.
---------------------------------------------------------------------------
\13\ See Sec. Indus. Fin. Mkts. Ass'n (SIFMA), Initial Decision
Release No. 1015, 2016 SEC LEXIS 2278 (ALJ June 1, 2016) (finding
the existence of vigorous competition with respect to non-core
market data).
---------------------------------------------------------------------------
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. In
fact, the Exchange believes that the Nasdaq Trading Insights market
data product will enhance competition \14\ by providing new options for
receiving market data to market participants, which was a primary goal
of the market data amendments adopted by Regulation NMS.\15\
---------------------------------------------------------------------------
\14\ Id.
\15\ See Regulation NMS Adopting Release, supra, at 37503.
---------------------------------------------------------------------------
The market for proprietary data products is also highly contestable
because market entry is rapid, inexpensive, and profitable. The history
of electronic trading is replete with examples of entrants that swiftly
grew into some of the largest electronic trading platforms and
proprietary data producers: Archipelago, Bloomberg Tradebook, Island,
RediBook, Attain, TracECN, BATS Trading and BATS/Direct Edge. A
proliferation of dark pools and other ATSs operate profitably with
fragmentary shares of consolidated market volume.
Regulation NMS, by deregulating the market for proprietary data,
has increased the contestability of that market. While broker-dealers
(``BDs'') have previously published their proprietary data
individually, Regulation NMS encourages market data vendors and BDs to
produce proprietary products cooperatively in a manner never before
possible. Multiple market data vendors already have the capability to
aggregate data and disseminate it on a profitable scale, including
Bloomberg and Thomson Reuters. In Europe, Cinnober aggregates and
disseminates data from over 40 brokers and multilateral trading
facilities.\16\
---------------------------------------------------------------------------
\16\ See https://www.cinnober.com/boat-trade-reporting.
---------------------------------------------------------------------------
In the case of TRFs, the rapid entry of several exchanges into this
space in 2006-2007 following the development and Commission approval of
the TRF structure demonstrates the contestability of this aspect of the
market.\17\ Given the demand for trade reporting services that is
itself a by-product of the fierce competition for transaction
executions--characterized notably by a proliferation of ATSs and BDs
offering internalization--any supra-competitive increase in the fees
associated with trade reporting or TRF data would shift trade report
volumes from one of the existing TRFs to the other \18\ and create
incentives for other TRF operators to enter the space. Alternatively,
because BDs reporting to TRFs are themselves free to consolidate the
market data that they report, the market for over-the-counter data
itself, separate and apart from the markets for execution and trade
reporting services--is fully contestable.
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\17\ The low cost exit of two TRFs from the market is also
evidence of a contestable market, because new entrants are reluctant
to enter a market where exit may involve substantial shut-down
costs.
\18\ It should be noted that the FINRA/NYSE TRF has, in recent
weeks, received reports for almost 10% of all over-the-counter
volume in NMS stocks.
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In this instance, the proposed rule change to offer the optional
four components that comprise the Nasdaq Trading Insights market data
product for a fee is subject to market participant interest.
Additionally, some market participants may already be able to derive
the same data that is provided by this component based on their
executions and algorithms that they have created.
In sum, if the four distinct market data components that comprise
the Nasdaq Trading Insights product and that are the subject of the
rule change
[[Page 52490]]
proposed herein are unattractive to market participants, market
participants will opt not to purchase any of the four components.
Accordingly, the Exchange does not believe that the proposed change
will impair the ability of members or competing order execution venues
to maintain their competitive standing in the financial markets.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
Written comments were neither solicited nor received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
Within 45 days of the date of publication of this notice in the
Federal Register or within such longer period up to 90 days (i) as the
Commission may designate if it finds such longer period to be
appropriate and publishes its reasons for so finding or (ii) as to
which the self-regulatory organization consents, the Commission will:
(A) By order approve or disapprove such proposed rule change, or
(B) institute proceedings to determine whether the proposed rule
change should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's Internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to rule-comments@sec.gov. Please
include File Number SR-NASDAQ-2016-101 on the subject line.
Paper Comments
Send paper comments in triplicate to Brent J. Fields,
Secretary, Securities and Exchange Commission, 100 F Street NE.,
Washington, DC 20549-1090.
All submissions should refer to File Number SR-NASDAQ-2016-101. 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-2016-101 and should
be submitted on or before August 29, 2016.
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\19\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\19\
Robert W. Errett,
Deputy Secretary.
[FR Doc. 2016-18703 Filed 8-5-16; 8:45 am]
BILLING CODE 8011-01-P