Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Market Data Section of Its Fee Schedule To Adopt Fees for BZX Summary Depth and Amend Fees for BZX Depth, 95693-95699 [2016-31298]
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Federal Register / Vol. 81, No. 249 / Wednesday, December 28, 2016 / Notices
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–
NYSEMKT–2016–121 and should be
submitted on or before January 18, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.14
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016–31310 Filed 12–27–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79636; File No. SRBatsBZX–2016–87]
Self-Regulatory Organizations; Bats
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change To Amend the
Market Data Section of Its Fee
Schedule To Adopt Fees for BZX
Summary Depth and Amend Fees for
BZX Depth
sradovich on DSK3GMQ082PROD with NOTICES
December 21, 2016.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
14, 2016, Bats BZX Exchange, Inc.
(‘‘BZX’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’)
the proposed rule change as described
in Items I, II, and III below, which Items
have been prepared by the Exchange.
The Exchange has designated the
proposed rule change as one
establishing or changing a member due,
fee, or other charge imposed by the
Exchange under Section 19(b)(3)(A)(ii)
of the Act 3 and Rule 19b–4(f)(2)
14 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
1 15
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thereunder,4 which renders the
proposed rule change effective upon
filing with the Commission. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange filed a proposal to
amend the Market Data section of its fee
schedule to: (i) Adopt fees for a new
market data product called BZX
Summary Depth; and (ii) amend the fees
for BZX Depth.
The text of the proposed rule change
is available at the Exchange’s Web site
at www.batstrading.com, at the
principal office of the Exchange, and at
the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in Sections A, B, and C below, of
the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to amend the
Market Data section of its fee schedule
to: (i) Adopt fees for a new market data
product called BZX Summary Depth;
and (ii) amend the fees for BZX Depth.
BZX Summary Depth
BZX Summary Depth is a data feed
that will provide aggregated two-sided
quotations for all displayed orders
entered into the System 5 for up to five
(5) price levels for securities traded on
the Exchange and for which the
Exchange reports quotes under the
Consolidated Tape Association (‘‘CTA’’)
Plan or the Nasdaq/UTP Plan.6 BZX
4 17
CFR 240.19b–4(f)(2).
is defined as the ‘‘the electronic
communications and trading facility designated by
the Board through which securities orders of Users
Are consolidated for ranking, execution and, when
applicable, routing away.’’ See Exchange Rule
1.5(aa).
6 See Exchange Rule 11.22(m).
5 ‘‘System’’
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95693
Summary Depth will also contain the
individual last sale information, Market
Status, Trading Status, and Trade Break
messages. The individual last sale
information will include the price, size,
and time of execution. The last sale
message will also include the
cumulative number of shares executed
on the Exchange for that trading day.
The Exchange intends to begin to offer
BZX Summary Depth on January 3,
2017.7
The Exchange now proposes to amend
its fee schedule to incorporate fees for
distribution of BZX Summary Depth to
subscribers.8 The proposed fees include
the following, each of which are
described in detail below: (i)
Distribution Fees for both Internal and
External Distributors; 9 (ii) Usage Fees
for both Professional 10 and NonProfessional 11 Users; (iii) an Enterprise
Fee; and (iv) a Digital Media Enterprise
Fee.
Distribution Fees. As proposed, each
Internal Distributor that receives BZX
7 See Reminder: Bats Global Markets to Introduce
Bats Summary Depth Feeds on January 3, 2017,
https://cdn.batstrading.com/resources/release_
notes/2017/Reminder-Bats-Global-Markets-toIntroduce-Bats-Summary-Depth-Feeds-on-Jan-32017.pdf.
8 The Exchange notes that its affiliated exchanges,
Bats EDGX Exchange, Inc. (‘‘EDGX’’), Bats EDGA
Exchange, Inc. (‘‘EDGA’’) and Bats BYX Exchange,
Inc. (‘‘BYX’’, together with the Exchange, EDGX and
EDGA, the ‘‘Bats Exchanges’’), also intent to file
proposed rule changes with Commission to adopt
similar fees for their respective Summary Depth
market data product.
9 A ‘‘Distributor’’ is defined as ‘‘any entity that
receives the Exchange Market Data product directly
from the Exchange or indirectly through another
entity and then distributes it internally or externally
to a third party.’’ See the Exchange’s fee schedule
available at https://www.bats.com/us/equities/
membership/fee_schedule/bzx/. An ‘‘Internal
Distributor’’ is defined as ‘‘a Distributor that
receives the Exchange Market Data product and
then distributes that data to one or more Users
within the Distributor’s own entity.’’ Id. An
‘‘External Distributor’’ is defined as ‘‘a Distributor
that receives the Exchange Market Data product and
then distributes that data to a third party or one or
more Users outside the Distributor’s own entity.’’
Id.’’
10 A ‘‘Professional User’’ is defined as ‘‘any User
other than a Non-Professional User.’’ See the
Exchange’s fee schedule available at https://
www.bats.com/us/equities/membership/fee_
schedule/bzx/.
11 A ‘‘Non-Professional User’’ is defined as ‘‘a
natural person who is not: (i) Registered or qualified
in any capacity with the Commission, the
Commodity Futures Trading Commission, any state
securities agency, any securities exchange or
association, or any commodities or futures contract
market or association; (ii) engaged as an
‘‘investment adviser’’ as that term is defined in
Section 202(a)(11) of the Investment Advisers Act
of 1940 (whether or not registered or qualified
under that Act); or (iii) employed by a bank or other
organization exempt from registration under federal
or state securities laws to perform functions that
would require registration or qualification if such
functions were performed for an organization not so
exempt.’’ Id.
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Summary Depth shall pay a fee of
$5,000 per month. The Exchange does
not propose to charge any User fees for
BZX Summary Depth where the data is
received and subsequently internally
distributed to Professional or NonProfessional Users. In addition, the
Exchange proposes to charge also
External Distributors that receive BZX
Summary Depth a fee of $5,000 per
month.
User Fees. The Exchange proposes to
charge External Distributors that
redistribute BZX Summary Depth
different fees for their Professional
Users and Non-Professional Users. The
Exchange will assess a monthly fee for
Professional Users of $5.00 per User.
Non-Professional Users will be assessed
a monthly fee of $0.15 per User. The
Exchange does not propose to charge
per User fees to Internal Distributors.
External Distributors that receive BZX
Summary Depth will be required to
count every Professional User and NonProfessional User to which they provide
BZX Summary Depth, the requirements
for which are identical to that currently
in place for other market data products
offered by the Exchange.12 Thus, the
External Distributor’s count will include
every person and device that accesses
the data regardless of the purpose for
which the individual or device uses the
data. External Distributors must report
all Professional and Non-Professional
Users in accordance with the following:
• In connection with an External
Distributor’s distribution of BZX
Summary Depth, the Distributor should
count as one User each unique User that
the Distributor has entitled to have
access to BZX Summary Depth.
However, where a device is dedicated
specifically to a single individual, the
Distributor should count only the
individual and need not count the
device.
• The External Distributor should
identify and report each unique User. If
a User uses the same unique method to
gain access to BZX Summary Depth, the
Distributor should count that as one
User. However, if a unique User uses
multiple methods to gain access to BZX
Summary Depth (e.g., a single User has
multiple passwords and user
identifications), the External Distributor
should report all of those methods as an
individual User.
12 See Securities Exchange Act Release Nos.
74285 (February 18, 2015); 80 FR 9828 (February
24, 2015) (SR–BATS–2015–11) (proposing fees for
the Bats One Feed); 75406 (July 9, 2015), 80 FR
41522 (July 15, 2015) (SR–BATS–2015–48)
(proposing user fees for the BZX Top and Last Sale
data feeds); and 75785 (August 28, 2015), 80 FR
53360 (September 3, 2015) (SR–BATS–2015–64)
(proposing fees for BZX Book Viewer).
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• External Distributors should report
each unique individual person who
receives access through multiple
devices as one User so long as each
device is dedicated specifically to that
individual.
• If an External Distributor entitles
one or more individuals to use the same
device, the External Distributor should
include only the individuals, and not
the device, in the count.
Each External Distributor will receive
a credit against its monthly Distribution
Fee for BZX Summary Depth equal to
the amount of its monthly Usage Fees
up to a maximum of the Distribution
Fee for BZX Summary Depth. For
example, an External Distributor will be
subject to a $5,000 monthly Distribution
Fee where they receive BZX Summary
Depth. If that External Distributor
reports User quantities totaling $5,000
or more of monthly usage of BZX
Summary Depth, it will pay no net
Distribution Fee, whereas if that same
External Distributor were to report User
quantities totaling $4,000 of monthly
usage, it will pay a net of $1,000 for the
Distribution Fee. External Distributors
will remain subject to the per User fees
discussed above.
Enterprise Fee. The Exchange also
proposes to establish a $30,000 per
month Enterprise Fee that will permit a
recipient firm who receives BZX
Summary Depth from an External
Distributor to receive the data for an
unlimited number of Professional and
Non-Professional Users. For example, if
a recipient firm had 15,000 Professional
Users who each receive BZX Summary
Depth at $5.00 per month, then that
recipient firm will pay $75,000 per
month in Professional Users fees. Under
the proposed Enterprise Fee, the
recipient firm will pay a flat fee of
$30,000 for an unlimited number of
Professional and Non-Professional Users
for BZX Summary Depth. A recipient
firm must pay a separate Enterprise Fee
for each External Distributor that
controls the display of BZX Summary
Depth if it wishes such User to be
covered by an Enterprise Fee rather than
by per User fees. A recipient firm that
pays the Enterprise Fee will not have to
report its number of such Users on a
monthly basis. However, every six
months, a recipient firm must provide
the Exchange with a count of the total
number of natural person users of each
product, including both Professional
and Non-Professional Users. Lastly, the
proposed Enterprise Fee would be
counted towards the Distribution Fee
credit described above, under which an
External Distributor receives a credit
towards its Distribution Fee equal to the
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amount of its monthly BZX Summary
Depth User fees.
Digital Media Enterprise Fee. The
Exchange proposes to adopt a Digital
Media Enterprise Fee of $7,500 per
month for BZX Summary Depth. As an
alternative to proposed User fees
discussed above, a recipient firm may
purchase a monthly Digital Media
Enterprise license to receive BZX
Summary Depth from an External
Distributor to distribute to an unlimited
number of Professional and NonProfessional Users for viewing via
television, Web sites, and mobile
devices for informational and nontrading purposes only without having to
account for the extent of access to the
data or the report the number of Users
to the Exchange. Lastly, the proposed
Digital Media Enterprise Fee would be
counted towards the Distribution Fee
credit described above, under which an
External Distributor receives a credit
towards its Distribution Fee equal to the
amount of its monthly BZX Summary
Depth User fees.
BZX Depth
BZX Depth is an uncompressed
market data feed that provides depth-ofbook quotations and execution
information based on equity orders
entered into the System.13 Currently, the
Exchange charges fees for both internal
and external distribution of BZX Depth.
The cost of BZX Depth for an Internal
Distributor is currently $1,500 per
month. The Exchange also separately
charges an External Distributor of BZX
Depth a flat fee of $5,000 per month.
The Exchange does not currently charge
Internal and External Distributors
separate display User fees. The
Exchange also charges a fee for NonDisplay Usage 14 by Trading Platforms 15
by which subscribers to BZX Depth are
charged a fee of $5,000 per month. This
fee is assessed in addition to existing
Distribution fees. The Exchange now
proposes to amend its fee schedule to
incorporate Usage Fees for both
Professional and Non-Professional Users
13 See
Exchange Rule 11.22(a) and (c).
term ‘‘Non-Display Usage’’ is defined as
‘‘any method of accessing a Market Data product
that involves access or use by a machine or
automated device without access or use of a display
by a natural person or persons.’’ See the Exchange’s
fee schedule available at https://www.bats.com/us/
equities/membership/fee_schedule/bzx/.
15 The term ‘‘Trading Platform’’ is defined as ‘‘any
execution platform operated as or by a registered
National Securities Exchange (as defined in Section
3(a)(1) of the Exchange Act), an Alternative Trading
System (as defined in Rule 300(a) of Regulation
ATS), or an Electronic Communications Network
(as defined in Rule 600(b)(23) of Regulation NMS).’’
See the Exchange’s fee schedule available at https://
www.bats.com/us/equities/membership/fee_
schedule/bzx/.
14 The
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and an Enterprise Fee for BZX Depth.
Each of these changes are described in
detail below.
User Fees. The Exchange proposes to
charge Internal and External
Distributors that redistribute BZX Depth
different fees for their Professional
Users and Non-Professional Users.16
The Exchange will assess a monthly fee
for Professional Users of $40.00 per
User. Non-Professional Users will be
assessed a monthly fee of $5.00 per
User. Distributors that receive BZX
Depth will be required to count every
Professional User and Non-Professional
User to which they provide BZX Depth,
the requirements for which are identical
to that set forth above for BZX Summary
Depth and as currently in place for other
market data products offered by the
Exchange.17
Enterprise Fee. The Exchange also
proposes to establish a $100,000 per
month Enterprise Fee that will permit
an Internal Distributor, External
Distributor, or a recipient firm who
receives BZX Depth from an External
Distributor to receive the data for an
unlimited number of Professional and
Non-Professional Users. For example, if
a recipient firm had 15,000 Professional
Users who each receive BZX Depth at
$40.00 per month, then that recipient
firm will pay $600,000 per month in
Professional Users fees. Under the
proposed Enterprise Fee, the recipient
firm will pay a flat fee of $100,000 for
an unlimited number of Professional
and Non-Professional Users for BZX
Depth. Like proposed above for BZX
Summary Depth, a recipient firm must
pay a separate Enterprise Fee for each
External Distributor that controls the
display of BZX Depth if it wishes such
User to be covered by an Enterprise Fee
rather than by per User fees. A recipient
firm that pays the Enterprise Fee will
not have to report its number of such
Users on a monthly basis. However,
every six months, a recipient firm must
provide the Exchange with a count of
the total number of natural person users
of each product, including both
Professional and Non-Professional
Users.
sradovich on DSK3GMQ082PROD with NOTICES
Implementation Date
The Exchange intends to implement
the proposed fee change on January 3,
2017.
16 The Exchange notes that, unlike as proposed
for BZX Summary Depth described above, both
Internal and External Distributors of BZX Depth
would be charged the same User fee for their
Professional and Non-Professional Users.
17 See supra note 12 and accompanying text.
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,18
in general, and furthers the objectives of
Section 6(b)(4),19 in particular, as it is
designed to provide for the equitable
allocation of reasonable dues, fees and
other charges among its members and
other recipients of Exchange data. The
Exchange believes that the proposed
rates are equitable and nondiscriminatory in that they apply
uniformly to all recipients of Exchange
data. The Exchange believes the
proposed fees are competitive with
those charged by other venues and,
therefore, reasonable and equitably
allocated to recipients. The Exchange
also believes it is reasonable to charge
different rates for BZX Depth and BZX
Summary Depth as both products
different levels of content (e.g., BZX
Depth contains quotations for all
individual orders while BZX Summary
Depth contains the aggregation
quotation information for all orders up
to five (5) price levels). Lastly, the
Exchange also believes that the
proposed fees are reasonable and nondiscriminatory because they will apply
uniformly to all recipients of Exchange
data.
The Exchange also believes that the
proposed rule change is consistent with
Section 11(A) of the Act 20 in that it
supports (i) fair competition among
brokers and dealers, among exchange
markets, and between exchange markets
and markets other than exchange
markets and (ii) the availability to
brokers, dealers, and investors of
information with respect to quotations
for and transactions in securities.
Furthermore, the proposed rule change
is consistent with Rule 603 of
Regulation NMS,21 which provides that
any national securities exchange that
distributes information with respect to
quotations for or transactions in an NMS
stock do so on terms that are not
unreasonably discriminatory. In
adopting Regulation NMS, the
Commission granted self-regulatory
organizations and broker-dealers
increased authority and flexibility to
offer new and unique market data to the
public. It was believed that this
authority would expand the amount of
data available to consumers, and also
spur innovation and competition for the
provision of market data.
In addition, the proposed fees would
not permit unfair discrimination
18 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
20 15 U.S.C. 78k–1.
21 17 CFR 242.603.
19 15
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95695
because all of the Exchange’s customers
and market data vendors will be subject
to the proposed fees on an equivalent
basis. BZX Summary Depth and BZX
Depth are distributed and purchased on
a voluntary basis, in that neither the
Exchange nor market data distributors
are required by any rule or regulation to
make this data available. Accordingly,
Distributors and Users can discontinue
use at any time and for any reason,
including due to an assessment of the
reasonableness of fees charged. Firms
have a wide variety of alternative
market data products from which to
choose, such as similar proprietary data
products offered by other exchanges and
consolidated data. Moreover, the
Exchange is not required to make any
proprietary data products available or to
offer any specific pricing alternatives to
any customers.
In addition, the fees that are the
subject of this rule filing are constrained
by competition. As explained below in
the Exchange’s Statement on Burden on
Competition, the existence of
alternatives to BZX Summary Depth and
BZX Depth further ensures that the
Exchange cannot set unreasonable fees,
or fees that are unreasonably
discriminatory, when vendors and
subscribers can elect such alternatives.
That is, the Exchange competes with
other exchanges (and their affiliates)
that provide similar market data
products. If another exchange (or its
affiliate) were to charge less to distribute
its similar product than the Exchange
charges to consolidate and distribute
BZX Summary Depth and BZX Depth,
prospective Users likely would not
subscribe to, or would cease subscribing
to, BZX Summary Depth and BZX
Depth.
The Exchange notes that the
Commission is not required to
undertake a cost-of-service or ratemaking approach. The Exchange
believes that, even if it were possible as
a matter of economic theory, cost-based
pricing for non-core market data would
be so complicated that it could not be
done practically.22
22 The Exchange believes that cost-based pricing
would be impractical because it would create
enormous administrative burdens for all parties,
including the Commission, to cost-regulate a large
number of participants and standardize and analyze
extraordinary amounts of information, accounts,
and reports. In addition, it is impossible to regulate
market data prices in isolation from prices charged
by markets for other services that are joint products.
Cost-based rate regulation would also lead to
litigation and may distort incentives, including
those to minimize costs and to innovate, leading to
further waste. Under cost-based pricing, the
Commission would be burdened with determining
a fair rate of return, and the industry could
experience frequent rate increases based on
Continued
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BZX Summary Depth
Distribution Fee. The Exchange
believes that the proposed Distribution
Fees are also reasonable, equitably
allocated, and not unreasonably
discriminatory. The fees for Members
and non-Members are uniform except
with respect to reasonable distinctions
with respect to internal and external
distribution. The Exchange believes that
the Distribution Fees for BZX Summary
Depth are reasonable and fair in light of
alternatives offered by other market
centers. For example, BZX Summary
Depth provides investors with
alternative market data and competes
with similar market data product
currently offered by the New York Stock
Exchange, Inc. (‘‘NYSE’’) and the
Nasdaq Stock Market LLC (‘‘Nasdaq’’).23
Specifically, the NYSE charges an
access fee of $5,000 per month for NYSE
OpenBook,24 which is equal to the
External Distribution fee proposed
herein for BZX Summary Depth.
User Fees. The Exchange believes that
implementing the Professional and NonProfessional User fees for BZX Summary
Depth are equitable and reasonable
because they will result in greater
availability to Professional and NonProfessional Users. Moreover,
introducing a modest Non-Professional
User fee for BZX Summary Depth is
reasonable because it provides an
additional method for retail investors to
escalating expense levels. Even in industries
historically subject to utility regulation, cost-based
ratemaking has been discredited. As such, the
Exchange believes that cost-based ratemaking
would be inappropriate for proprietary market data
and inconsistent with Congress’s direction that the
Commission use its authority to foster the
development of the national market system, and
that market forces will continue to provide
appropriate pricing discipline. See Appendix C to
NYSE’s comments to the Commission’s 2000
Concept Release on the Regulation of Market
Information Fees and Revenues, which can be
found on the Commission’s Web site at https://
www.sec.gov/rules/concept/s72899/buck1.htm. See
also Securities Exchange Act Release No. 73816
(December 11, 2014), 79 FR 75200 (December 17,
2014) (SR–NYSE–2014–64) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
to Establish an Access Fee for the NYSE Best Quote
and Trades Data Feed, Operative December 1,
2014).
23 See Nasdaq Rule 7023(a)(1)(C) (describing
Nasdaq TotalView is a depth-of-book data feed that
includes all orders and quotes from all Nasdaq
members displayed in the Nasdaq Market Center as
well as the aggregate size of such orders and quotes
at each price level in the execution functionality of
the Nasdaq Market Center). See also Nasdaq Book
Viewer, a description of which is available at
https://data.nasdaq.com/Book Viewer.aspx. See
NYSE OpenBook available at https://
www.nyxdata.com/openbook (providing real-time
view of the NYSE limit order book).
24 See NYSE Market Data Pricing dated November
2016 available at https://www.nyxdata.com/. Nasdaq
charges distribution fees ranging from $375 for 1–
39 subscribers to $75,000 for more than 250
subscribers. See Nasdaq Rule 7023(b)(4).
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18:54 Dec 27, 2016
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access BZX Summary Depth data by
providing the same data that is available
to Professional Users. The Exchange
believes that the proposed fees are
equitable and not unfairly
discriminatory because they will be
charged uniformly to recipient firms
and Users. The fee structure of
differentiated Professional and NonProfessional fees is utilized by the
Exchange for the Bats One Feed and has
long been used by other exchanges for
their proprietary data products, and by
the Nasdaq UTP and the CTA and CQ
Plans in order to reduce the price of
data to retail investors and make it more
broadly available.25 Offering BZX
Summary Depth to Non-Professional
Users with the same data available to
Professional Users results in greater
equity among data recipients.
In addition, the proposed fees are
reasonable when compared to similar
fees for comparable products offered by
the NYSE and Nasdaq. Specifically,
NYSE offers NYSE OpenBook for a
monthly fee of $60.00 per professional
subscriber and $15 per non-professional
subscriber.26 Nasdaq offers Nasdaq
TotalView-Aggregated for a monthly fee
of $70.00 per professional subscriber
and $14 per non-professional
subscriber.27 The Exchange’s proposed
per User Fees for BZX Summary Depth
are less than the NYSE and Nasdaq fees.
Enterprise Fee. The proposed
Enterprise Fee for BZX Summary Depth
is equitable and reasonable as the fees
proposed are less than the enterprise
fees currently charged for Nasdaq
TotalView-Aggregated. Nasdaq charges
an enterprise fee of $100,000 per month
for Nasdaq TotalView-Aggregated,28
which is far greater than the proposed
Enterprise Fee of $30,000 per month for
BZX Summary Depth. In addition, the
25 See Securities Exchange Act Release Nos.
74285 (February 18, 2015), 80 FR 9828 (February
24, 2015) (SR–BATS–2015–11); 74283 (February 18,
2015), 80 FR 9809 (February 24, 2015) (SR–EDGA–
2015–09); 74282 (February 17, 2015), 80 FR 9487
(February 23, 2015) (SR–EDGX–2015–09); and
74284 (February 18, 2015), 80 FR 9792 (February
24, 2015) (SR–BYX–2015–09) (‘‘Initial BATS One
Feed Fee Filings’’). See also, e.g., Securities
Exchange Act Release No. 20002, File No. S7–433
(July 22, 1983) (establishing nonprofessional fees
for CTA data); and Nasdaq Rules 7023(b), 7047.
26 See NYSE Market Data Pricing dated November
2016 available at https://www.nyxdata.com/.
27 See Nasdaq Rule 7023(b)(2).
28 See Nasdaq Rule 7023(c)(2) (stating that a
distributor that is also a broker-dealer pays a
monthly fee of $100,000 for the right to provide
Nasdaq TotalView and for display usage for internal
distribution, or for external distribution to both
professional and non-professional subscribers with
whom the firm has a brokerage relationship.)
Nasdaq also charges an enterprise fee of $25,000 to
provide Nasdaq TotalView to an unlimited number
of non-professional subscribers only. See Nasdaq
Rule 7023(c)(1).
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Enterprise Fee proposed by the
Exchange could result in a fee reduction
for recipient firms with a large number
of Professional and Non-Professional
Users. If a recipient firm has a smaller
number of Professional Users of BZX
Summary Depth, then it may continue
using the per User structure and benefit
from the per User Fee reductions. By
reducing prices for recipient firms with
a large number of Professional and NonProfessional Users, the Exchange
believes that more firms may choose to
receive and to distribute BZX Summary
Depth, thereby expanding the
distribution of this market data for the
benefit of investors.
The Exchange further believes that the
proposed Enterprise Fee is reasonable
because it will simplify reporting for
certain recipients that have large
numbers of Professional and NonProfessional Users. Firms that pay the
proposed Enterprise Fee will not have to
report the number of Users on a
monthly basis as they currently do, but
rather will only have to count natural
person users every six months, which is
a significant reduction in administrative
burden. Finally, the Exchange believes
that it is equitable and not unfairly
discriminatory to establish an Enterprise
Fee because it reduces the Exchange’s
costs and the Distributor’s
administrative burdens in tracking and
auditing large numbers of Users.
Digital Media Enterprise Fee. The
Exchange believes that the proposed
Digital Media Enterprise Fee for BZX
Summary Depth provides for an
equitable allocation of reasonable fees
among recipients of the data and is not
designed to permit unfair
discrimination among customers,
brokers, or dealers. In establishing the
Digital Media Enterprise Fee, the
Exchange recognizes that there is
demand for a more seamless and easierto-administer data distribution model
that takes into account the expanded
variety of media and communication
devices that investors utilize today. The
Exchange believes the Digital Media
Enterprise Fee will be easy to
administer because data recipients that
purchase it would not be required to
differentiate between Professional and
Non-Professional Users, account for the
extent of access to the data, or report the
number of Users. This is a significant
reduction on a recipient firm’s
administrative burdens and is a
significant value to investors. For
example, a television broadcaster could
display BZX Summary Depth data
during market-related programming and
on its Web site or allow viewers to view
the data via their mobile devices,
creating a more seamless distribution
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model that will allow investors more
choice in how they receive and view
market data, all without having to
account for and/or measure who
accesses the data and how often they do
so.
The proposed Digital Media
Enterprise Fee is equitable and
reasonable because it will also enable
recipient firms to more widely
distribute data from BZX Summary
Depth to investors for informational
purposes at a lower cost than is
available today. For example, a recipient
firm may purchase an Enterprise license
in the amount of $30,000 per month for
to receive BZX Summary Depth from an
External Distributor for an unlimited
number of Professional and NonProfessional Users, which is greater than
the proposed Digital Media Enterprise
Fee. The Exchange also believes the
amount of the Digital Media Enterprise
Fee is reasonable as compared to the
existing enterprise fees discussed above
because the distribution of BZX
Summary Depth data is limited to
television, Web sites, and mobile
devices for informational purposes only,
while distribution of BZX Summary
Depth data pursuant to an Enterprise
license contains no such limitation. The
Exchange also believes that the
proposed Digital Media Enterprise Fee
is equitable and reasonable because it is
less than similar fees charged by other
exchanges.29
BZX Depth
sradovich on DSK3GMQ082PROD with NOTICES
User Fees. The Exchange believes that
implementing the Professional and NonProfessional User fees for BZX Depth are
equitable and reasonable because they
will result in greater availability to
Professional and Non-Professional
Users. Moreover, introducing a modest
Non-Professional User fee for BZX
Depth is reasonable because it provides
an additional method for retail investors
to access BZX Depth data by providing
the same data that is available to
Professional Users. The Exchange
believes that the proposed fees are
equitable and not unfairly
discriminatory because they will be
charged uniformly to recipient firms
and Users. The fee structure of
differentiated Professional and NonProfessional fees is utilized by the
Exchange and has long been used by
29 Nasdaq offers proprietary data products for
distribution over the internet and television under
alternative fee schedules that are subject to
maximum fee of $50,000 [sic] per month. See
Nasdaq Rule 7039(b). The NYSE charges a Digit
Media Enterprise fee of $40,000 per month for the
NYSE Trade Digital Media product. See Securities
Exchange Act Release No. 69272 (April 2, 2013), 78
FR 20983 (April 8, 2013) (SR–NYSE–2013–23).
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other exchanges for their proprietary
data products, and by the Nasdaq UTP
and the CTA and CQ Plans in order to
reduce the price of data to retail
investors and make it more broadly
available.30 Offering BZX Depth to NonProfessional Users with the same data
available to Professional Users results in
greater equity among data recipients.
The Exchange also believes it is
equitable, reasonable, and not unfairly
discriminatory to charge User fees to
Internal Distributors, as such fees are
currently charged by NYSE and
Nasdaq.31
In addition, the proposed fees are
reasonable when compared to similar
fees for comparable products offered by
the NYSE and Nasdaq. Specifically,
NYSE offers NYSE OpenBook Ultra for
a monthly fee of $60.00 per professional
subscriber and $15 per non-professional
subscriber.32 Nasdaq offers Nasdaq
TotalView-ITCH for a monthly fee of
$70.00 per professional subscriber and
$14 per non-professional subscriber.33
The Exchange’s proposed per User Fees
for BZX Depth are less than the NYSE
and Nasdaq fees.
Enterprise Fee. The proposed
Enterprise Fee for BZX Depth is
equitable and reasonable as compared to
the enterprise fees currently charged for
Nasdaq TotalView-ITCH. Nasdaq
charges an enterprise fee of $100,000
per month for Nasdaq TotalViewITCH,34 which is equal to the proposed
Enterprise Fee of $100,000 per month
for BZX Depth. In addition, the
Enterprise Fee proposed by the
Exchange could result in a fee reduction
for recipient firms with a large number
of Professional and Non-Professional
Users. If a recipient firm has a smaller
number of Professional Users of BZX
Depth, then it may continue using the
per User structure and benefit from the
per User Fee reductions. By reducing
prices for recipient firms with a large
number of Professional and NonProfessional Users, the Exchange
believes that more firms may choose to
receive and to distribute BZX Depth,
thereby expanding the distribution of
this market data for the benefit of
investors.
The Exchange further believes that the
proposed Enterprise Fee is reasonable
because it will simplify reporting for
certain recipients that have large
numbers of Professional and NonProfessional Users. Firms that pay the
30 See
supra note 24.
supra notes 24 and 25 (not limiting the
application of user fees to external distribution
only).
32 See supra note 25.
33 See supra note 26.
34 See supra note 27.
31 See
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95697
proposed Enterprise Fee will not have to
report the number of Users on a
monthly basis as they currently do, but
rather will only have to count natural
person users every six months, which is
a significant reduction in administrative
burden. Finally, the Exchange believes
that it is equitable and not unfairly
discriminatory to establish an Enterprise
Fee because it reduces the Exchange’s
costs and the Distributor’s
administrative burdens in tracking and
auditing large numbers of Users.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will result in
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act, as amended.
The Exchange’s ability to price BZX
Depth and BZX Summary Depth is
constrained by: (i) competition among
exchanges, other trading platforms, and
Trade Reporting Facilities (‘‘TRF’’) that
compete with each other in a variety of
dimensions; (ii) the existence of
inexpensive real-time consolidated data
and market-specific data and free
delayed data; and (iii) the inherent
contestability of the market for
proprietary data.
The Exchange and its market data
products are subject to significant
competitive forces and the proposed
fees represent responses to that
competition. To start, the Exchange
competes intensely for order flow. It
competes with the other national
securities exchanges that currently trade
equities, with electronic communication
networks, with quotes posted in
FINRA’s Alternative Display Facility,
with alternative trading systems, and
with securities firms that primarily
trade as principal with their customer
order flow.
In addition, BZX Summary Depth and
BZX Depth compete with a number of
alternative products. For instance, BZX
Summary Depth and BZX Depth do
provide a complete picture of all trading
activity in a security. Rather, the other
national securities exchanges, the
several TRFs of FINRA, and Electronic
Communication Networks (‘‘ECN’’) that
produce proprietary data all produce
trades and trade reports. Each is
currently permitted to produce last sale
information products, and many
currently do, including Nasdaq and
NYSE. In addition, market participants
can gain access to BZX last sale and
depth-of-book quotations, though
integrated with the prices of other
markets, on feeds made available
through the SIPs.
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In sum, the availability of a variety of
alternative sources of information
imposes significant competitive
pressures on Exchange data products
and the Exchange’s compelling need to
attract order flow imposes significant
competitive pressure on the Exchange to
act equitably, fairly, and reasonably in
setting the proposed data product fees.
The proposed data product fees are, in
part, responses to that pressure. The
Exchange believes that the proposed
fees would reflect an equitable
allocation of its overall costs to users of
its facilities.
In addition, when establishing the
proposed fees, the Exchange considered
the competitiveness of the market for
proprietary data and all of the
implications of that competition. The
Exchange believes that it has considered
all relevant factors and has not
considered irrelevant factors in order to
establish fair, reasonable, and not
unreasonably discriminatory fees and an
equitable allocation of fees among all
Users. The existence of alternatives to
BZX Depth and BZX Summary Depth,
including existing similar feeds by other
exchanges, consolidated data, and
proprietary data from other sources,
ensures that the Exchange cannot set
unreasonable fees, or fees that are
unreasonably discriminatory, when
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.
Lastly, the Exchange represents that
the increase in pricing of BZX Depth
and the proposed pricing of the BZX
Summary Feed would continue to
enable a competing vendor to create a
competing product to the Exchange’s
Bats One Feed on the same price and
latency basis as the Exchange. The Bats
One Feed is a data feed that
disseminates, on a real-time basis, the
aggregate BBO of all displayed orders
for securities traded on each of the Bats
Exchanges and for the Bats Exchanges
report quotes under the CTA Plan or the
Nasdaq/UTP Plan. The Bats One Feed
also contains the individual last sale
information for the Bats Exchanges
(collectively with the aggregate BBO, the
‘‘Bats One Summary Feed’’). In
addition, the Bats One Feed contains
optional functionality which enables
recipients to receive aggregated twosided quotations from the Bats
Exchanges for up to five (5) price levels
(‘‘Bats One Premium Feed’’).35 The
35 See Exchange Rule 11.22(i). See also Securities
Exchange Act Release No. 73918 (December 23,
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18:54 Dec 27, 2016
Jkt 241001
Exchange uses the following data feeds
to create the Bats One Feed, each of
which are available to vendors: EDGX
Depth, EDGA Depth, BYX Depth, and
the BZX Depth.
When adopting the Bats One Feed, the
Exchange represented that a vendor
could create a competing product based
in the data feed used to construct the
Bats One Feed on the same cost and
latency basis as the Exchange.36
Therefore, the Exchange designed the
pricing of these products so that their
aggregate cost is not greater than the
Bats One Feed, thereby enabling a
vendor to create a competing product to
the Bats One Feed on the same cost
basis as the Exchange. However, the
Exchange now proposes to increase the
cost of BZX Depth, which when
combined with the proposed increases
by its affiliates for their depth products,
would cause their aggregate cost to be
higher than the Bats One Premium
Feed.37 However, to ensure that a
vendor could continue to create a
competing product to the Bats One
Premium Feed at no greater cost, that
vendor could now utilize BZX Summary
Depth, as well as the Summary Depth
feeds of BYX, EDGA, and EDGX to
create a competing product to the Bats
One Premium Feed for less cost and on
the same latency basis as the
Exchange.38 The Exchange has designed
the content and pricing of BZX
Summary Depth, and related products
by its affiliates, so that a vendor could
utilize those feeds, in lieu of the Bats
Exchange’s existing depth-of-book
products, to construct a competing
product on the same cost and latency
basis as the Exchange. The pricing the
Exchange and its affiliates propose to
charge for Summary Depth feeds would
be lower than the cost to obtain the Bats
One Premium Feed.39 Such pricing
2014), 79 FR 78920 (December 31, 2014) (File Nos.
SR–EDGX–2014–25; SR–EDGA–2014–25; SR–
BATS–2014–055; SR–BYX–2014–030) (Notice of
Amendments No. 2 and Order Granting Accelerated
Approval to Proposed Rule Changes, as Modified by
Amendments Nos. 1 and 2, to Establish a New
Market Data Product called the Bats One Feed)
(‘‘Bats One Approval Order’’).
36 Id.
37 The Exchange notes that a vendor seeking to
create a product to compete with the Bats One
Summary Feed may continue to utilize each of the
Bats Exchange’s Top and Last Sale data feeds, the
aggregate cost of which is less than the Bats One
Summary Feed.
38 While the proposed BZX Summary Depth feed
does not contain the symbol summary or
consolidated volume data included in the Bats One
Feed, a vendor could include this information in a
competing product as this information is easily
derivable from the proposed feeds or can be
obtained from the securities information processors
on the same terms as the Exchange.
39 While the aggregate cost of each of the Bats
Exchange’s Summary Depth Products equals the
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would continue to enable a vendor to
receive each of the Bats Exchange’s
Summary Depth feeds and offer a
similar product to the Bats One
Premium Feed on a competitive basis
and at no greater cost than the
Exchange.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants or Others
The Exchange has neither solicited
nor received written comments on the
proposed rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act 40 and paragraph (f) of Rule
19b–4 thereunder.41 At any time within
60 days of the filing of the proposed rule
change, the Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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–BatsBZX–2016–87 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–BatsBZX–2016–87. 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
cost of the Bats One Premium Feed, the cost of the
Bats One Feed continues to be greater because
subscribers are required to pay an additional $1,000
aggregation fee. See the Exchange’s fee schedule
available at https://www.bats.com/us/equities/
membership/fee_schedule/bzx/.
40 15 U.S.C. 78s(b)(3)(A).
41 17 CFR 240.19b–4(f).
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Federal Register / Vol. 81, No. 249 / Wednesday, December 28, 2016 / Notices
only one method. The Commission will
post all comments on the Commission’s
Internet Web site (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for Web site viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE.,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of such
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change;
the Commission does not edit personal
identifying information from
submissions. You should submit only
information that you wish to make
available publicly. All submissions
should refer to File Number SR–
BatsBZX–2016–87 and should be
submitted on or before January 18, 2017.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.42
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016–31298 Filed 12–27–16; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–79640; File No. SR–
NYSEMKT–2016–117]
Self-Regulatory Organizations; NYSE
MKT LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To (1) Change How
Orders Would Be Processed When the
Protected Best Bid (‘‘PBB’’) Is Higher
Than the Protected Best Offer (‘‘PBO’’)
(The ‘‘PBBO’’) in Certain
Circumstances, and (2) Adopt a Limit
Order Price Protection Mechanism
sradovich on DSK3GMQ082PROD with NOTICES
December 21, 2016.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that on December
12, 2016, NYSE MKT LLC (the
42 17
CFR 200.30–3(a)(12).
U.S.C.78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
VerDate Sep<11>2014
18:54 Dec 27, 2016
Jkt 241001
‘‘Exchange’’ or ‘‘NYSE MKT’’) filed with
the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to (1) change
how orders would be processed when
the protected best bid (‘‘PBB’’) is higher
than the protected best offer (‘‘PBO’’)
(the ‘‘PBBO’’) in certain circumstances,
and (2) adopt a limit order price
protection mechanism. The proposed
rule change is available on the
Exchange’s Web site at www.nyse.com,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
self-regulatory organization 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 those statements may be examined at
the places specified in Item IV below.
The Exchange has prepared summaries,
set forth in sections A, B, and C below,
of the most significant parts of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to (1) change
how orders would be processed when
the PBB is higher than the PBO in
certain circumstances, and (2) adopt a
limit order price protection mechanism.
Processing of Orders When the PBBO Is
Crossed (Rules 13—Equities, 70—
Equities, 76—Equities and 1000—
Equities)
Currently, when the PBB is priced
higher than the PBO in a security (i.e.,
the PBBO is crossed), buy and sell
orders trade on the Exchange without
regard to price and without routing,
consistent with the exception to the
Order Protection Rule enumerated in
Rule 611(b)(4) of Regulation NMS
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95699
(‘‘Rule 611(b)(4)’’).4 In certain
circumstances as described herein, the
Exchange proposes to no longer avail
itself of this exception to the Order
Protection Rule.5 In those
circumstances, rather than trading
through a protected quotation when the
PBBO is crossed, routable orders may
instead be routed to protected
quotations. In order to implement this
change, the Exchange proposes to
amend the following rules:
Rule 13—Equities
Market Order
Rule 13(a)(1)—Equities provides that
a Market Order that is eligible for
automatic executions is an unpriced
order to buy or sell a stated amount of
a security that is to be traded at the best
price obtainable without trading
through the NBBO. Rule 13(a)(1)(B)(i)—
Equities provides that when the
Exchange is open for continuous
trading, a Market Order will be rejected
on arrival, or cancelled if resting, if
there is no contra-side NBBO or if the
best protected quotations are or become
crossed.
The Exchange proposes to no longer
reject or cancel Market Orders when the
PBBO is crossed. To effectuate this
change, the Exchange proposes to delete
the phrase ‘‘or if the best protected
quotations are or become crossed’’ in
Rule 13(a)(1)(B)(i)—Equities. As a result
of this proposed change, if a Market
Order arrives when the PBBO is crossed,
the Exchange would process the Market
Order in the same way as when the
NBBO is crossed under the current
rule.6
Routing to Protected Quotations
The Exchange proposes to amend the
Rule 13—Equities to specify
circumstances when the Exchange
would make order handling decisions
based on a protected quotation. The
Exchange proposes to make these
changes because, in the circumstances
described below, the Exchange would
no longer avail itself of the exception to
the Order Protection Rule specified in
Rule 611(b)(4), and therefore the
Exchange would include protected
4 17 CFR 242.611(b)(4). See also Rule 15A—
Equities (Order Protection Rule).
5 For example, assume if the Exchange has a
displayed bid of $10.00 and another market crosses
that bid with a protected offer of $9.99. Currently,
if the Exchange receives a marketable order to buy,
it will trade on the Exchange at prices higher than
$9.99. Once the Exchange no longer avails itself of
the exception in Rule 611(b)(4), unless otherwise
specified in Exchange rules as described in this
proposed rule change, arriving routable interest to
buy that is marketable on the Exchange would
instead first route to that protected offer.
6 See Rule 13(a)(1)(B)(ii)—Equities.
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]]>Agencies
[Federal Register Volume 81, Number 249 (Wednesday, December 28, 2016)]
[Notices]
[Pages 95693-95699]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2016-31298]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-79636; File No. SR-BatsBZX-2016-87]
Self-Regulatory Organizations; Bats BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change To Amend
the Market Data Section of Its Fee Schedule To Adopt Fees for BZX
Summary Depth and Amend Fees for BZX Depth
December 21, 2016.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the ``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that on December 14, 2016, Bats BZX Exchange, Inc. (``BZX'' or the
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Exchange has designated the proposed rule change as one
establishing or changing a member due, fee, or other charge imposed by
the Exchange under Section 19(b)(3)(A)(ii) of the Act \3\ and Rule 19b-
4(f)(2) thereunder,\4\ which renders the proposed rule change effective
upon filing with the Commission. The Commission is publishing this
notice to solicit comments on the proposed rule change from interested
persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A)(ii).
\4\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange filed a proposal to amend the Market Data section of
its fee schedule to: (i) Adopt fees for a new market data product
called BZX Summary Depth; and (ii) amend the fees for BZX Depth.
The text of the proposed rule change is available at the Exchange's
Web site at www.batstrading.com, at the principal office of the
Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
Sections A, B, and C below, of the most significant parts of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to amend the Market Data section of its fee
schedule to: (i) Adopt fees for a new market data product called BZX
Summary Depth; and (ii) amend the fees for BZX Depth.
BZX Summary Depth
BZX Summary Depth is a data feed that will provide aggregated two-
sided quotations for all displayed orders entered into the System \5\
for up to five (5) price levels for securities traded on the Exchange
and for which the Exchange reports quotes under the Consolidated Tape
Association (``CTA'') Plan or the Nasdaq/UTP Plan.\6\ BZX Summary Depth
will also contain the individual last sale information, Market Status,
Trading Status, and Trade Break messages. The individual last sale
information will include the price, size, and time of execution. The
last sale message will also include the cumulative number of shares
executed on the Exchange for that trading day. The Exchange intends to
begin to offer BZX Summary Depth on January 3, 2017.\7\
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\5\ ``System'' is defined as the ``the electronic communications
and trading facility designated by the Board through which
securities orders of Users Are consolidated for ranking, execution
and, when applicable, routing away.'' See Exchange Rule 1.5(aa).
\6\ See Exchange Rule 11.22(m).
\7\ See Reminder: Bats Global Markets to Introduce Bats Summary
Depth Feeds on January 3, 2017, https://cdn.batstrading.com/resources/release_notes/2017/Reminder-Bats-Global-Markets-to-Introduce-Bats-Summary-Depth-Feeds-on-Jan-3-2017.pdf.
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The Exchange now proposes to amend its fee schedule to incorporate
fees for distribution of BZX Summary Depth to subscribers.\8\ The
proposed fees include the following, each of which are described in
detail below: (i) Distribution Fees for both Internal and External
Distributors; \9\ (ii) Usage Fees for both Professional \10\ and Non-
Professional \11\ Users; (iii) an Enterprise Fee; and (iv) a Digital
Media Enterprise Fee.
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\8\ The Exchange notes that its affiliated exchanges, Bats EDGX
Exchange, Inc. (``EDGX''), Bats EDGA Exchange, Inc. (``EDGA'') and
Bats BYX Exchange, Inc. (``BYX'', together with the Exchange, EDGX
and EDGA, the ``Bats Exchanges''), also intent to file proposed rule
changes with Commission to adopt similar fees for their respective
Summary Depth market data product.
\9\ A ``Distributor'' is defined as ``any entity that receives
the Exchange Market Data product directly from the Exchange or
indirectly through another entity and then distributes it internally
or externally to a third party.'' See the Exchange's fee schedule
available at https://www.bats.com/us/equities/membership/fee_schedule/bzx/. An ``Internal Distributor'' is defined as ``a
Distributor that receives the Exchange Market Data product and then
distributes that data to one or more Users within the Distributor's
own entity.'' Id. An ``External Distributor'' is defined as ``a
Distributor that receives the Exchange Market Data product and then
distributes that data to a third party or one or more Users outside
the Distributor's own entity.'' Id.''
\10\ A ``Professional User'' is defined as ``any User other than
a Non-Professional User.'' See the Exchange's fee schedule available
at https://www.bats.com/us/equities/membership/fee_schedule/bzx/.
\11\ A ``Non-Professional User'' is defined as ``a natural
person who is not: (i) Registered or qualified in any capacity with
the Commission, the Commodity Futures Trading Commission, any state
securities agency, any securities exchange or association, or any
commodities or futures contract market or association; (ii) engaged
as an ``investment adviser'' as that term is defined in Section
202(a)(11) of the Investment Advisers Act of 1940 (whether or not
registered or qualified under that Act); or (iii) employed by a bank
or other organization exempt from registration under federal or
state securities laws to perform functions that would require
registration or qualification if such functions were performed for
an organization not so exempt.'' Id.
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Distribution Fees. As proposed, each Internal Distributor that
receives BZX
[[Page 95694]]
Summary Depth shall pay a fee of $5,000 per month. The Exchange does
not propose to charge any User fees for BZX Summary Depth where the
data is received and subsequently internally distributed to
Professional or Non-Professional Users. In addition, the Exchange
proposes to charge also External Distributors that receive BZX Summary
Depth a fee of $5,000 per month.
User Fees. The Exchange proposes to charge External Distributors
that redistribute BZX Summary Depth different fees for their
Professional Users and Non-Professional Users. The Exchange will assess
a monthly fee for Professional Users of $5.00 per User. Non-
Professional Users will be assessed a monthly fee of $0.15 per User.
The Exchange does not propose to charge per User fees to Internal
Distributors.
External Distributors that receive BZX Summary Depth will be
required to count every Professional User and Non-Professional User to
which they provide BZX Summary Depth, the requirements for which are
identical to that currently in place for other market data products
offered by the Exchange.\12\ Thus, the External Distributor's count
will include every person and device that accesses the data regardless
of the purpose for which the individual or device uses the data.
External Distributors must report all Professional and Non-Professional
Users in accordance with the following:
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\12\ See Securities Exchange Act Release Nos. 74285 (February
18, 2015); 80 FR 9828 (February 24, 2015) (SR-BATS-2015-11)
(proposing fees for the Bats One Feed); 75406 (July 9, 2015), 80 FR
41522 (July 15, 2015) (SR-BATS-2015-48) (proposing user fees for the
BZX Top and Last Sale data feeds); and 75785 (August 28, 2015), 80
FR 53360 (September 3, 2015) (SR-BATS-2015-64) (proposing fees for
BZX Book Viewer).
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In connection with an External Distributor's distribution
of BZX Summary Depth, the Distributor should count as one User each
unique User that the Distributor has entitled to have access to BZX
Summary Depth. However, where a device is dedicated specifically to a
single individual, the Distributor should count only the individual and
need not count the device.
The External Distributor should identify and report each
unique User. If a User uses the same unique method to gain access to
BZX Summary Depth, the Distributor should count that as one User.
However, if a unique User uses multiple methods to gain access to BZX
Summary Depth (e.g., a single User has multiple passwords and user
identifications), the External Distributor should report all of those
methods as an individual User.
External Distributors should report each unique individual
person who receives access through multiple devices as one User so long
as each device is dedicated specifically to that individual.
If an External Distributor entitles one or more
individuals to use the same device, the External Distributor should
include only the individuals, and not the device, in the count.
Each External Distributor will receive a credit against its monthly
Distribution Fee for BZX Summary Depth equal to the amount of its
monthly Usage Fees up to a maximum of the Distribution Fee for BZX
Summary Depth. For example, an External Distributor will be subject to
a $5,000 monthly Distribution Fee where they receive BZX Summary Depth.
If that External Distributor reports User quantities totaling $5,000 or
more of monthly usage of BZX Summary Depth, it will pay no net
Distribution Fee, whereas if that same External Distributor were to
report User quantities totaling $4,000 of monthly usage, it will pay a
net of $1,000 for the Distribution Fee. External Distributors will
remain subject to the per User fees discussed above.
Enterprise Fee. The Exchange also proposes to establish a $30,000
per month Enterprise Fee that will permit a recipient firm who receives
BZX Summary Depth from an External Distributor to receive the data for
an unlimited number of Professional and Non-Professional Users. For
example, if a recipient firm had 15,000 Professional Users who each
receive BZX Summary Depth at $5.00 per month, then that recipient firm
will pay $75,000 per month in Professional Users fees. Under the
proposed Enterprise Fee, the recipient firm will pay a flat fee of
$30,000 for an unlimited number of Professional and Non-Professional
Users for BZX Summary Depth. A recipient firm must pay a separate
Enterprise Fee for each External Distributor that controls the display
of BZX Summary Depth if it wishes such User to be covered by an
Enterprise Fee rather than by per User fees. A recipient firm that pays
the Enterprise Fee will not have to report its number of such Users on
a monthly basis. However, every six months, a recipient firm must
provide the Exchange with a count of the total number of natural person
users of each product, including both Professional and Non-Professional
Users. Lastly, the proposed Enterprise Fee would be counted towards the
Distribution Fee credit described above, under which an External
Distributor receives a credit towards its Distribution Fee equal to the
amount of its monthly BZX Summary Depth User fees.
Digital Media Enterprise Fee. The Exchange proposes to adopt a
Digital Media Enterprise Fee of $7,500 per month for BZX Summary Depth.
As an alternative to proposed User fees discussed above, a recipient
firm may purchase a monthly Digital Media Enterprise license to receive
BZX Summary Depth from an External Distributor to distribute to an
unlimited number of Professional and Non-Professional Users for viewing
via television, Web sites, and mobile devices for informational and
non-trading purposes only without having to account for the extent of
access to the data or the report the number of Users to the Exchange.
Lastly, the proposed Digital Media Enterprise Fee would be counted
towards the Distribution Fee credit described above, under which an
External Distributor receives a credit towards its Distribution Fee
equal to the amount of its monthly BZX Summary Depth User fees.
BZX Depth
BZX Depth is an uncompressed market data feed that provides depth-
of-book quotations and execution information based on equity orders
entered into the System.\13\ Currently, the Exchange charges fees for
both internal and external distribution of BZX Depth. The cost of BZX
Depth for an Internal Distributor is currently $1,500 per month. The
Exchange also separately charges an External Distributor of BZX Depth a
flat fee of $5,000 per month. The Exchange does not currently charge
Internal and External Distributors separate display User fees. The
Exchange also charges a fee for Non-Display Usage \14\ by Trading
Platforms \15\ by which subscribers to BZX Depth are charged a fee of
$5,000 per month. This fee is assessed in addition to existing
Distribution fees. The Exchange now proposes to amend its fee schedule
to incorporate Usage Fees for both Professional and Non-Professional
Users
[[Page 95695]]
and an Enterprise Fee for BZX Depth. Each of these changes are
described in detail below.
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\13\ See Exchange Rule 11.22(a) and (c).
\14\ The term ``Non-Display Usage'' is defined as ``any method
of accessing a Market Data product that involves access or use by a
machine or automated device without access or use of a display by a
natural person or persons.'' See the Exchange's fee schedule
available at https://www.bats.com/us/equities/membership/fee_schedule/bzx/.
\15\ The term ``Trading Platform'' is defined as ``any execution
platform operated as or by a registered National Securities Exchange
(as defined in Section 3(a)(1) of the Exchange Act), an Alternative
Trading System (as defined in Rule 300(a) of Regulation ATS), or an
Electronic Communications Network (as defined in Rule 600(b)(23) of
Regulation NMS).'' See the Exchange's fee schedule available at
https://www.bats.com/us/equities/membership/fee_schedule/bzx/.
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User Fees. The Exchange proposes to charge Internal and External
Distributors that redistribute BZX Depth different fees for their
Professional Users and Non-Professional Users.\16\ The Exchange will
assess a monthly fee for Professional Users of $40.00 per User. Non-
Professional Users will be assessed a monthly fee of $5.00 per User.
Distributors that receive BZX Depth will be required to count every
Professional User and Non-Professional User to which they provide BZX
Depth, the requirements for which are identical to that set forth above
for BZX Summary Depth and as currently in place for other market data
products offered by the Exchange.\17\
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\16\ The Exchange notes that, unlike as proposed for BZX Summary
Depth described above, both Internal and External Distributors of
BZX Depth would be charged the same User fee for their Professional
and Non-Professional Users.
\17\ See supra note 12 and accompanying text.
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Enterprise Fee. The Exchange also proposes to establish a $100,000
per month Enterprise Fee that will permit an Internal Distributor,
External Distributor, or a recipient firm who receives BZX Depth from
an External Distributor to receive the data for an unlimited number of
Professional and Non-Professional Users. For example, if a recipient
firm had 15,000 Professional Users who each receive BZX Depth at $40.00
per month, then that recipient firm will pay $600,000 per month in
Professional Users fees. Under the proposed Enterprise Fee, the
recipient firm will pay a flat fee of $100,000 for an unlimited number
of Professional and Non-Professional Users for BZX Depth. Like proposed
above for BZX Summary Depth, a recipient firm must pay a separate
Enterprise Fee for each External Distributor that controls the display
of BZX Depth if it wishes such User to be covered by an Enterprise Fee
rather than by per User fees. A recipient firm that pays the Enterprise
Fee will not have to report its number of such Users on a monthly
basis. However, every six months, a recipient firm must provide the
Exchange with a count of the total number of natural person users of
each product, including both Professional and Non-Professional Users.
Implementation Date
The Exchange intends to implement the proposed fee change on
January 3, 2017.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\18\ in general, and
furthers the objectives of Section 6(b)(4),\19\ in particular, as it is
designed to provide for the equitable allocation of reasonable dues,
fees and other charges among its members and other recipients of
Exchange data. The Exchange believes that the proposed rates are
equitable and non-discriminatory in that they apply uniformly to all
recipients of Exchange data. The Exchange believes the proposed fees
are competitive with those charged by other venues and, therefore,
reasonable and equitably allocated to recipients. The Exchange also
believes it is reasonable to charge different rates for BZX Depth and
BZX Summary Depth as both products different levels of content (e.g.,
BZX Depth contains quotations for all individual orders while BZX
Summary Depth contains the aggregation quotation information for all
orders up to five (5) price levels). Lastly, the Exchange also believes
that the proposed fees are reasonable and non-discriminatory because
they will apply uniformly to all recipients of Exchange data.
---------------------------------------------------------------------------
\18\ 15 U.S.C. 78f.
\19\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
The Exchange also believes that the proposed rule change is
consistent with Section 11(A) of the Act \20\ in that it supports (i)
fair competition among brokers and dealers, among exchange markets, and
between exchange markets and markets other than exchange markets and
(ii) the availability to brokers, dealers, and investors of information
with respect to quotations for and transactions in securities.
Furthermore, the proposed rule change is consistent with Rule 603 of
Regulation NMS,\21\ which provides that any national securities
exchange that distributes information with respect to quotations for or
transactions in an NMS stock do so on terms that are not unreasonably
discriminatory. In adopting Regulation NMS, the Commission granted
self-regulatory organizations and broker-dealers increased authority
and flexibility to offer new and unique market data to the public. It
was believed that this authority would expand the amount of data
available to consumers, and also spur innovation and competition for
the provision of market data.
---------------------------------------------------------------------------
\20\ 15 U.S.C. 78k-1.
\21\ 17 CFR 242.603.
---------------------------------------------------------------------------
In addition, the proposed fees would not permit unfair
discrimination because all of the Exchange's customers and market data
vendors will be subject to the proposed fees on an equivalent basis.
BZX Summary Depth and BZX Depth are distributed and purchased on a
voluntary basis, in that neither the Exchange nor market data
distributors are required by any rule or regulation to make this data
available. Accordingly, Distributors and Users can discontinue use at
any time and for any reason, including due to an assessment of the
reasonableness of fees charged. Firms have a wide variety of
alternative market data products from which to choose, such as similar
proprietary data products offered by other exchanges and consolidated
data. Moreover, the Exchange is not required to make any proprietary
data products available or to offer any specific pricing alternatives
to any customers.
In addition, the fees that are the subject of this rule filing are
constrained by competition. As explained below in the Exchange's
Statement on Burden on Competition, the existence of alternatives to
BZX Summary Depth and BZX Depth further ensures that the Exchange
cannot set unreasonable fees, or fees that are unreasonably
discriminatory, when vendors and subscribers can elect such
alternatives. That is, the Exchange competes with other exchanges (and
their affiliates) that provide similar market data products. If another
exchange (or its affiliate) were to charge less to distribute its
similar product than the Exchange charges to consolidate and distribute
BZX Summary Depth and BZX Depth, prospective Users likely would not
subscribe to, or would cease subscribing to, BZX Summary Depth and BZX
Depth.
The Exchange notes that the Commission is not required to undertake
a cost-of-service or rate-making approach. The Exchange believes that,
even if it were possible as a matter of economic theory, cost-based
pricing for non-core market data would be so complicated that it could
not be done practically.\22\
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\22\ The Exchange believes that cost-based pricing would be
impractical because it would create enormous administrative burdens
for all parties, including the Commission, to cost-regulate a large
number of participants and standardize and analyze extraordinary
amounts of information, accounts, and reports. In addition, it is
impossible to regulate market data prices in isolation from prices
charged by markets for other services that are joint products. Cost-
based rate regulation would also lead to litigation and may distort
incentives, including those to minimize costs and to innovate,
leading to further waste. Under cost-based pricing, the Commission
would be burdened with determining a fair rate of return, and the
industry could experience frequent rate increases based on
escalating expense levels. Even in industries historically subject
to utility regulation, cost-based ratemaking has been discredited.
As such, the Exchange believes that cost-based ratemaking would be
inappropriate for proprietary market data and inconsistent with
Congress's direction that the Commission use its authority to foster
the development of the national market system, and that market
forces will continue to provide appropriate pricing discipline. See
Appendix C to NYSE's comments to the Commission's 2000 Concept
Release on the Regulation of Market Information Fees and Revenues,
which can be found on the Commission's Web site at https://www.sec.gov/rules/concept/s72899/buck1.htm. See also Securities
Exchange Act Release No. 73816 (December 11, 2014), 79 FR 75200
(December 17, 2014) (SR-NYSE-2014-64) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change to Establish an
Access Fee for the NYSE Best Quote and Trades Data Feed, Operative
December 1, 2014).
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[[Page 95696]]
BZX Summary Depth
Distribution Fee. The Exchange believes that the proposed
Distribution Fees are also reasonable, equitably allocated, and not
unreasonably discriminatory. The fees for Members and non-Members are
uniform except with respect to reasonable distinctions with respect to
internal and external distribution. The Exchange believes that the
Distribution Fees for BZX Summary Depth are reasonable and fair in
light of alternatives offered by other market centers. For example, BZX
Summary Depth provides investors with alternative market data and
competes with similar market data product currently offered by the New
York Stock Exchange, Inc. (``NYSE'') and the Nasdaq Stock Market LLC
(``Nasdaq'').\23\ Specifically, the NYSE charges an access fee of
$5,000 per month for NYSE OpenBook,\24\ which is equal to the External
Distribution fee proposed herein for BZX Summary Depth.
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\23\ See Nasdaq Rule 7023(a)(1)(C) (describing Nasdaq TotalView
is a depth-of-book data feed that includes all orders and quotes
from all Nasdaq members displayed in the Nasdaq Market Center as
well as the aggregate size of such orders and quotes at each price
level in the execution functionality of the Nasdaq Market Center).
See also Nasdaq Book Viewer, a description of which is available at
https://data.nasdaq.com/Book Viewer.aspx. See NYSE OpenBook
available at https://www.nyxdata.com/openbook (providing real-time
view of the NYSE limit order book).
\24\ See NYSE Market Data Pricing dated November 2016 available
at https://www.nyxdata.com/. Nasdaq charges distribution fees ranging
from $375 for 1-39 subscribers to $75,000 for more than 250
subscribers. See Nasdaq Rule 7023(b)(4).
---------------------------------------------------------------------------
User Fees. The Exchange believes that implementing the Professional
and Non-Professional User fees for BZX Summary Depth are equitable and
reasonable because they will result in greater availability to
Professional and Non-Professional Users. Moreover, introducing a modest
Non-Professional User fee for BZX Summary Depth is reasonable because
it provides an additional method for retail investors to access BZX
Summary Depth data by providing the same data that is available to
Professional Users. The Exchange believes that the proposed fees are
equitable and not unfairly discriminatory because they will be charged
uniformly to recipient firms and Users. The fee structure of
differentiated Professional and Non-Professional fees is utilized by
the Exchange for the Bats One Feed and has long been used by other
exchanges for their proprietary data products, and by the Nasdaq UTP
and the CTA and CQ Plans in order to reduce the price of data to retail
investors and make it more broadly available.\25\ Offering BZX Summary
Depth to Non-Professional Users with the same data available to
Professional Users results in greater equity among data recipients.
---------------------------------------------------------------------------
\25\ See Securities Exchange Act Release Nos. 74285 (February
18, 2015), 80 FR 9828 (February 24, 2015) (SR-BATS-2015-11); 74283
(February 18, 2015), 80 FR 9809 (February 24, 2015) (SR-EDGA-2015-
09); 74282 (February 17, 2015), 80 FR 9487 (February 23, 2015) (SR-
EDGX-2015-09); and 74284 (February 18, 2015), 80 FR 9792 (February
24, 2015) (SR-BYX-2015-09) (``Initial BATS One Feed Fee Filings'').
See also, e.g., Securities Exchange Act Release No. 20002, File No.
S7-433 (July 22, 1983) (establishing nonprofessional fees for CTA
data); and Nasdaq Rules 7023(b), 7047.
---------------------------------------------------------------------------
In addition, the proposed fees are reasonable when compared to
similar fees for comparable products offered by the NYSE and Nasdaq.
Specifically, NYSE offers NYSE OpenBook for a monthly fee of $60.00 per
professional subscriber and $15 per non-professional subscriber.\26\
Nasdaq offers Nasdaq TotalView-Aggregated for a monthly fee of $70.00
per professional subscriber and $14 per non-professional
subscriber.\27\ The Exchange's proposed per User Fees for BZX Summary
Depth are less than the NYSE and Nasdaq fees.
---------------------------------------------------------------------------
\26\ See NYSE Market Data Pricing dated November 2016 available
at https://www.nyxdata.com/.
\27\ See Nasdaq Rule 7023(b)(2).
---------------------------------------------------------------------------
Enterprise Fee. The proposed Enterprise Fee for BZX Summary Depth
is equitable and reasonable as the fees proposed are less than the
enterprise fees currently charged for Nasdaq TotalView-Aggregated.
Nasdaq charges an enterprise fee of $100,000 per month for Nasdaq
TotalView-Aggregated,\28\ which is far greater than the proposed
Enterprise Fee of $30,000 per month for BZX Summary Depth. In addition,
the Enterprise Fee proposed by the Exchange could result in a fee
reduction for recipient firms with a large number of Professional and
Non-Professional Users. If a recipient firm has a smaller number of
Professional Users of BZX Summary Depth, then it may continue using the
per User structure and benefit from the per User Fee reductions. By
reducing prices for recipient firms with a large number of Professional
and Non-Professional Users, the Exchange believes that more firms may
choose to receive and to distribute BZX Summary Depth, thereby
expanding the distribution of this market data for the benefit of
investors.
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\28\ See Nasdaq Rule 7023(c)(2) (stating that a distributor that
is also a broker-dealer pays a monthly fee of $100,000 for the right
to provide Nasdaq TotalView and for display usage for internal
distribution, or for external distribution to both professional and
non-professional subscribers with whom the firm has a brokerage
relationship.) Nasdaq also charges an enterprise fee of $25,000 to
provide Nasdaq TotalView to an unlimited number of non-professional
subscribers only. See Nasdaq Rule 7023(c)(1).
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The Exchange further believes that the proposed Enterprise Fee is
reasonable because it will simplify reporting for certain recipients
that have large numbers of Professional and Non-Professional Users.
Firms that pay the proposed Enterprise Fee will not have to report the
number of Users on a monthly basis as they currently do, but rather
will only have to count natural person users every six months, which is
a significant reduction in administrative burden. Finally, the Exchange
believes that it is equitable and not unfairly discriminatory to
establish an Enterprise Fee because it reduces the Exchange's costs and
the Distributor's administrative burdens in tracking and auditing large
numbers of Users.
Digital Media Enterprise Fee. The Exchange believes that the
proposed Digital Media Enterprise Fee for BZX Summary Depth provides
for an equitable allocation of reasonable fees among recipients of the
data and is not designed to permit unfair discrimination among
customers, brokers, or dealers. In establishing the Digital Media
Enterprise Fee, the Exchange recognizes that there is demand for a more
seamless and easier-to-administer data distribution model that takes
into account the expanded variety of media and communication devices
that investors utilize today. The Exchange believes the Digital Media
Enterprise Fee will be easy to administer because data recipients that
purchase it would not be required to differentiate between Professional
and Non-Professional Users, account for the extent of access to the
data, or report the number of Users. This is a significant reduction on
a recipient firm's administrative burdens and is a significant value to
investors. For example, a television broadcaster could display BZX
Summary Depth data during market-related programming and on its Web
site or allow viewers to view the data via their mobile devices,
creating a more seamless distribution
[[Page 95697]]
model that will allow investors more choice in how they receive and
view market data, all without having to account for and/or measure who
accesses the data and how often they do so.
The proposed Digital Media Enterprise Fee is equitable and
reasonable because it will also enable recipient firms to more widely
distribute data from BZX Summary Depth to investors for informational
purposes at a lower cost than is available today. For example, a
recipient firm may purchase an Enterprise license in the amount of
$30,000 per month for to receive BZX Summary Depth from an External
Distributor for an unlimited number of Professional and Non-
Professional Users, which is greater than the proposed Digital Media
Enterprise Fee. The Exchange also believes the amount of the Digital
Media Enterprise Fee is reasonable as compared to the existing
enterprise fees discussed above because the distribution of BZX Summary
Depth data is limited to television, Web sites, and mobile devices for
informational purposes only, while distribution of BZX Summary Depth
data pursuant to an Enterprise license contains no such limitation. The
Exchange also believes that the proposed Digital Media Enterprise Fee
is equitable and reasonable because it is less than similar fees
charged by other exchanges.\29\
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\29\ Nasdaq offers proprietary data products for distribution
over the internet and television under alternative fee schedules
that are subject to maximum fee of $50,000 [sic] per month. See
Nasdaq Rule 7039(b). The NYSE charges a Digit Media Enterprise fee
of $40,000 per month for the NYSE Trade Digital Media product. See
Securities Exchange Act Release No. 69272 (April 2, 2013), 78 FR
20983 (April 8, 2013) (SR-NYSE-2013-23).
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BZX Depth
User Fees. The Exchange believes that implementing the Professional
and Non-Professional User fees for BZX Depth are equitable and
reasonable because they will result in greater availability to
Professional and Non-Professional Users. Moreover, introducing a modest
Non-Professional User fee for BZX Depth is reasonable because it
provides an additional method for retail investors to access BZX Depth
data by providing the same data that is available to Professional
Users. The Exchange believes that the proposed fees are equitable and
not unfairly discriminatory because they will be charged uniformly to
recipient firms and Users. The fee structure of differentiated
Professional and Non-Professional fees is utilized by the Exchange and
has long been used by other exchanges for their proprietary data
products, and by the Nasdaq UTP and the CTA and CQ Plans in order to
reduce the price of data to retail investors and make it more broadly
available.\30\ Offering BZX Depth to Non-Professional Users with the
same data available to Professional Users results in greater equity
among data recipients. The Exchange also believes it is equitable,
reasonable, and not unfairly discriminatory to charge User fees to
Internal Distributors, as such fees are currently charged by NYSE and
Nasdaq.\31\
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\30\ See supra note 24.
\31\ See supra notes 24 and 25 (not limiting the application of
user fees to external distribution only).
---------------------------------------------------------------------------
In addition, the proposed fees are reasonable when compared to
similar fees for comparable products offered by the NYSE and Nasdaq.
Specifically, NYSE offers NYSE OpenBook Ultra for a monthly fee of
$60.00 per professional subscriber and $15 per non-professional
subscriber.\32\ Nasdaq offers Nasdaq TotalView-ITCH for a monthly fee
of $70.00 per professional subscriber and $14 per non-professional
subscriber.\33\ The Exchange's proposed per User Fees for BZX Depth are
less than the NYSE and Nasdaq fees.
---------------------------------------------------------------------------
\32\ See supra note 25.
\33\ See supra note 26.
---------------------------------------------------------------------------
Enterprise Fee. The proposed Enterprise Fee for BZX Depth is
equitable and reasonable as compared to the enterprise fees currently
charged for Nasdaq TotalView-ITCH. Nasdaq charges an enterprise fee of
$100,000 per month for Nasdaq TotalView-ITCH,\34\ which is equal to the
proposed Enterprise Fee of $100,000 per month for BZX Depth. In
addition, the Enterprise Fee proposed by the Exchange could result in a
fee reduction for recipient firms with a large number of Professional
and Non-Professional Users. If a recipient firm has a smaller number of
Professional Users of BZX Depth, then it may continue using the per
User structure and benefit from the per User Fee reductions. By
reducing prices for recipient firms with a large number of Professional
and Non-Professional Users, the Exchange believes that more firms may
choose to receive and to distribute BZX Depth, thereby expanding the
distribution of this market data for the benefit of investors.
---------------------------------------------------------------------------
\34\ See supra note 27.
---------------------------------------------------------------------------
The Exchange further believes that the proposed Enterprise Fee is
reasonable because it will simplify reporting for certain recipients
that have large numbers of Professional and Non-Professional Users.
Firms that pay the proposed Enterprise Fee will not have to report the
number of Users on a monthly basis as they currently do, but rather
will only have to count natural person users every six months, which is
a significant reduction in administrative burden. Finally, the Exchange
believes that it is equitable and not unfairly discriminatory to
establish an Enterprise Fee because it reduces the Exchange's costs and
the Distributor's administrative burdens in tracking and auditing large
numbers of Users.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
result in any burden on competition that is not necessary or
appropriate in furtherance of the purposes of the Act, as amended. The
Exchange's ability to price BZX Depth and BZX Summary Depth is
constrained by: (i) competition among exchanges, other trading
platforms, and Trade Reporting Facilities (``TRF'') that compete with
each other in a variety of dimensions; (ii) the existence of
inexpensive real-time consolidated data and market-specific data and
free delayed data; and (iii) the inherent contestability of the market
for proprietary data.
The Exchange and its market data products are subject to
significant competitive forces and the proposed fees represent
responses to that competition. To start, the Exchange competes
intensely for order flow. It competes with the other national
securities exchanges that currently trade equities, with electronic
communication networks, with quotes posted in FINRA's Alternative
Display Facility, with alternative trading systems, and with securities
firms that primarily trade as principal with their customer order flow.
In addition, BZX Summary Depth and BZX Depth compete with a number
of alternative products. For instance, BZX Summary Depth and BZX Depth
do provide a complete picture of all trading activity in a security.
Rather, the other national securities exchanges, the several TRFs of
FINRA, and Electronic Communication Networks (``ECN'') that produce
proprietary data all produce trades and trade reports. Each is
currently permitted to produce last sale information products, and many
currently do, including Nasdaq and NYSE. In addition, market
participants can gain access to BZX last sale and depth-of-book
quotations, though integrated with the prices of other markets, on
feeds made available through the SIPs.
[[Page 95698]]
In sum, the availability of a variety of alternative sources of
information imposes significant competitive pressures on Exchange data
products and the Exchange's compelling need to attract order flow
imposes significant competitive pressure on the Exchange to act
equitably, fairly, and reasonably in setting the proposed data product
fees. The proposed data product fees are, in part, responses to that
pressure. The Exchange believes that the proposed fees would reflect an
equitable allocation of its overall costs to users of its facilities.
In addition, when establishing the proposed fees, the Exchange
considered the competitiveness of the market for proprietary data and
all of the implications of that competition. The Exchange believes that
it has considered all relevant factors and has not considered
irrelevant factors in order to establish fair, reasonable, and not
unreasonably discriminatory fees and an equitable allocation of fees
among all Users. The existence of alternatives to BZX Depth and BZX
Summary Depth, including existing similar feeds by other exchanges,
consolidated data, and proprietary data from other sources, ensures
that the Exchange cannot set unreasonable fees, or fees that are
unreasonably discriminatory, when 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.
Lastly, the Exchange represents that the increase in pricing of BZX
Depth and the proposed pricing of the BZX Summary Feed would continue
to enable a competing vendor to create a competing product to the
Exchange's Bats One Feed on the same price and latency basis as the
Exchange. The Bats One Feed is a data feed that disseminates, on a
real-time basis, the aggregate BBO of all displayed orders for
securities traded on each of the Bats Exchanges and for the Bats
Exchanges report quotes under the CTA Plan or the Nasdaq/UTP Plan. The
Bats One Feed also contains the individual last sale information for
the Bats Exchanges (collectively with the aggregate BBO, the ``Bats One
Summary Feed''). In addition, the Bats One Feed contains optional
functionality which enables recipients to receive aggregated two-sided
quotations from the Bats Exchanges for up to five (5) price levels
(``Bats One Premium Feed'').\35\ The Exchange uses the following data
feeds to create the Bats One Feed, each of which are available to
vendors: EDGX Depth, EDGA Depth, BYX Depth, and the BZX Depth.
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\35\ See Exchange Rule 11.22(i). See also Securities Exchange
Act Release No. 73918 (December 23, 2014), 79 FR 78920 (December 31,
2014) (File Nos. SR-EDGX-2014-25; SR-EDGA-2014-25; SR-BATS-2014-055;
SR-BYX-2014-030) (Notice of Amendments No. 2 and Order Granting
Accelerated Approval to Proposed Rule Changes, as Modified by
Amendments Nos. 1 and 2, to Establish a New Market Data Product
called the Bats One Feed) (``Bats One Approval Order'').
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When adopting the Bats One Feed, the Exchange represented that a
vendor could create a competing product based in the data feed used to
construct the Bats One Feed on the same cost and latency basis as the
Exchange.\36\ Therefore, the Exchange designed the pricing of these
products so that their aggregate cost is not greater than the Bats One
Feed, thereby enabling a vendor to create a competing product to the
Bats One Feed on the same cost basis as the Exchange. However, the
Exchange now proposes to increase the cost of BZX Depth, which when
combined with the proposed increases by its affiliates for their depth
products, would cause their aggregate cost to be higher than the Bats
One Premium Feed.\37\ However, to ensure that a vendor could continue
to create a competing product to the Bats One Premium Feed at no
greater cost, that vendor could now utilize BZX Summary Depth, as well
as the Summary Depth feeds of BYX, EDGA, and EDGX to create a competing
product to the Bats One Premium Feed for less cost and on the same
latency basis as the Exchange.\38\ The Exchange has designed the
content and pricing of BZX Summary Depth, and related products by its
affiliates, so that a vendor could utilize those feeds, in lieu of the
Bats Exchange's existing depth-of-book products, to construct a
competing product on the same cost and latency basis as the Exchange.
The pricing the Exchange and its affiliates propose to charge for
Summary Depth feeds would be lower than the cost to obtain the Bats One
Premium Feed.\39\ Such pricing would continue to enable a vendor to
receive each of the Bats Exchange's Summary Depth feeds and offer a
similar product to the Bats One Premium Feed on a competitive basis and
at no greater cost than the Exchange.
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\36\ Id.
\37\ The Exchange notes that a vendor seeking to create a
product to compete with the Bats One Summary Feed may continue to
utilize each of the Bats Exchange's Top and Last Sale data feeds,
the aggregate cost of which is less than the Bats One Summary Feed.
\38\ While the proposed BZX Summary Depth feed does not contain
the symbol summary or consolidated volume data included in the Bats
One Feed, a vendor could include this information in a competing
product as this information is easily derivable from the proposed
feeds or can be obtained from the securities information processors
on the same terms as the Exchange.
\39\ While the aggregate cost of each of the Bats Exchange's
Summary Depth Products equals the cost of the Bats One Premium Feed,
the cost of the Bats One Feed continues to be greater because
subscribers are required to pay an additional $1,000 aggregation
fee. See the Exchange's fee schedule available at https://www.bats.com/us/equities/membership/fee_schedule/bzx/.
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C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants or Others
The Exchange has neither solicited nor received written comments on
the proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A) of the Act \40\ and paragraph (f) of Rule 19b-4
thereunder.\41\ 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.
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\40\ 15 U.S.C. 78s(b)(3)(A).
\41\ 17 CFR 240.19b-4(f).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
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-BatsBZX-2016-87 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-BatsBZX-2016-87. 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
[[Page 95699]]
only one method. The Commission will post all comments on the
Commission's Internet Web site (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for Web site viewing and printing in
the Commission's Public Reference Room, 100 F Street NE., Washington,
DC 20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of such filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change; the Commission does not edit
personal identifying information from submissions. You should submit
only information that you wish to make available publicly. All
submissions should refer to File Number SR-BatsBZX-2016-87 and should
be submitted on or before January 18, 2017.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\42\
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\42\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2016-31298 Filed 12-27-16; 8:45 am]
BILLING CODE 8011-01-P
