Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change Related to Fees for the BZX Depth Market Data Product, 2237-2240 [2018-00532]
Download as PDF
<![CDATA[
Federal Register / Vol. 83, No. 10 / Tuesday, January 16, 2018 / Notices
All statements and representations
made in this filing regarding the index
composition, the description of the
portfolio or reference assets, limitations
on portfolio holdings or reference assets,
dissemination and availability of index,
reference asset, and intraday indicative
values, and the applicability of
Exchange rules specified in this filing
shall constitute continued listing
requirements for the Fund. The issuer
has represented to the Exchange that it
will advise the Exchange of any failure
by the Fund or the Shares to comply
with the continued listing requirements,
and, pursuant to its obligations under
Section 19(g)(1) of the Act, the Exchange
will surveil for compliance with the
continued listing requirements. If the
Fund or the Shares are not in
compliance with the applicable listing
requirements, the Exchange will
commence delisting procedures under
BZX Rule 14.12. This approval order is
based on all of the Exchange’s
representations, including those set
forth above and in Amendment No. 2.
For the foregoing reasons, the
Commission finds that the proposed
rule change is consistent with Section
6(b)(5) of the Exchange Act 29 and
Section 11A(a)(1)(C)(iii) of the Exchange
Act 30 and the rules and regulations
thereunder applicable to a national
securities exchange.
IV. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(2) of the Exchange Act,31
that the proposed rule change (SR–
BATSBZX–2017–58), as modified by
Amendment No. 2, be, and hereby is,
approved.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.32
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–00533 Filed 1–12–18; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[SEC File No. 270–50, OMB Control No.
3235–0060]
daltland on DSKBBV9HB2PROD with NOTICES
Proposed Collection; Comment
Request
Upon Written Request Copies Available
From: Securities and Exchange
Commission, Office of FOIA Services,
29 15
U.S.C. 78f(b)(5).
U.S.C. 78k–1(a)(1)(C)(iii).
31 15 U.S.C. 78s(b)(2).
32 17 CFR 200.30–3(a)(12).
30 15
VerDate Sep<11>2014
22:48 Jan 12, 2018
Jkt 244001
100 F Street NE, Washington, DC
20549–2736.
Extension:
Form 8–K.
Frm 00107
Dated: January 9, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–00496 Filed 1–12–18; 8:45 am]
Notice is hereby given that, pursuant
to the Paperwork Reduction Act of 1995
(44 U.S.C. 3501 et seq.), the Securities
and Exchange Commission
(‘‘Commission’’) is soliciting comments
on the collection of information
summarized below. The Commission
plans to submit this existing collection
of information to the Office of
Management and Budget for extension
and approval.
Form 8–K (17 CFR 249.308) is filed by
issuers to satisfy their current reporting
obligations pursuant to Sections 13 and
15(d) of the Securities Exchange Act of
1934 (15 U.S.C. 78m and 78o(d)) in
connection with the occurrence of
significant corporate events. The
purpose of Form 8–K is to provide
investors with prompt disclosure of
material information so that investors
will be able to make investment and
voting decisions better informed and
receive information more timely. We
estimate that Form 8–K takes 5 hours
per response and is filed by 121,600
responses annually. We estimate that
75% of the 5 hours per response (3.75
hours) is prepared by the issuer for a
total annual reporting burden of 456,000
hours (3.75 hours per response x
121,600 responses).
Written comments are invited on: (a)
Whether this collection of information
is necessary for the proper performance
of the functions of the agency, including
whether the information will have
practical utility; (b) the accuracy of the
agency’s estimate of the burden imposed
by the collection of information; (c)
ways to enhance the quality, utility, and
clarity of the information collected; and
(d) ways to minimize the burden of the
collection of information on
respondents, including through the use
of automated collection techniques or
other forms of information technology.
Consideration will be given to
comments and suggestions submitted in
writing within 60 days of this
publication.
An agency may not conduct or
sponsor, and a person is not required to
respond to, a collection of information
unless it displays a currently valid
control number.
Please direct your written comment to
Pamela Dyson, Director/Chief
Information Officer, Securities and
Exchange Commission, c/o Remi PavlikSimon, 100 F Street NE, Washington,
DC 20549 or send an email to: PRA_
Mailbox@sec.gov.
PO 00000
2237
Fmt 4703
Sfmt 4703
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82475; File No. SR–
CboeBZX–2017–018]
Self-Regulatory Organizations; Cboe
BZX Exchange, Inc.; Notice of Filing
and Immediate Effectiveness of a
Proposed Rule Change Related to Fees
for the BZX Depth Market Data Product
January 9, 2018.
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
27, 2017, Cboe BZX Exchange, Inc. (the
‘‘Exchange’’ or ‘‘BZX’’) 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 Exchange. The
Exchange has designated the proposed
rule change as one establishing or
changing a member due, fee, or other
charge imposed by the Exchange under
Section 19(b)(3)(A)(ii) of the Act 3 and
Rule 19b–4(f)(2) thereunder,4 which
renders the proposed rule change
effective upon filing with the
Commission. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange filed a proposal to
amend the Market Data section of its fee
schedule to introduce new fees for NonDisplay Usage of BZX Depth.
The text of the proposed rule change
is available at the Exchange’s website at
www.markets.cboe.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
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A)(ii).
4 17 CFR 240.19b–4(f)(2).
2 17
E:\FR\FM\16JAN1.SGM
16JAN1
2238
Federal Register / Vol. 83, No. 10 / Tuesday, January 16, 2018 / Notices
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
daltland on DSKBBV9HB2PROD with NOTICES
1. Purpose
The Exchange proposes to amend the
Market Data section of its fee schedule
to introduce new fees for Non-Display
Usage 5 of 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.6 The
Exchange currently charges subscribers
to BZX Depth a fee of $5,000 per month
for Non-Display Usage of BZX Depth by
its Trading Platforms.7 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.’’ 8 Trading Platforms include
registered National Securities
Exchanges, Alternative Trading Systems
(‘‘ATSs’’), and Electronic
Communications Networks (‘‘ECNs’’) as
those terms are defined in the Exchange
Act and regulations and rules
thereunder. Previously, subscribers of
BZX Depth that used the feed for NonDisplay purposes but did not utilize the
feed within a Trading Platform were
charged the existing Distributors fees.
Forms of Non-Display Use include,
but are not limited to, algorithmic or
automated trading, order routing,
surveillance, order management, risk
management, clearance and settlement
activities, and account maintenance.9
Non-Display Usage does not include any
use of BZX Depth that relates solely to
transportation, dissemination, and
5 See the Exchange’s fee schedule available at
https://markets.cboe.com/us/equities/membership/
fee_schedule/bzx/.
6 See Exchange Rule 13.8(a).
7 A 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://
markets.cboe.com/us/equities/membership/fee_
schedule/bzx/.
8 See the Exchange’s fee schedule available at
https://markets.cboe.com/us/equities/membership/
fee_schedule/bzx/.
9 See e.g., Nasdaq Rule IM–7023–1(c), U.S. NonDisplay Information.
VerDate Sep<11>2014
22:48 Jan 12, 2018
Jkt 244001
redistribution of BZX Depth, or that
results in the output of BZX Depth
solely for display. Non-display uses of
data for non-trading purposes benefits
data recipients by allowing users to
automate functions, to achieve greater
speed and accuracy, and to reduce costs
of labor. While some non-trading uses
do not directly generate revenues, they
can substantially reduce a data
recipient’s costs by automating many
functions. Those functions can be
carried out in a more efficient and
accurate manner, with reduced errors
and labor costs.
The Exchange now proposes to adopt
a separate fee of $2,000 per month to
cover other forms of Non-Display Usage
other than through a Trading Platform.
The proposed fee would be assessed in
addition to existing Distributor 10 fees
and would supplement the existing
Non-Display Usage fee for Trading
Platforms. Specifically, subscribers who
are subject to the Non-Display Usage by
Trading Platform fee but also utilize
BZX Depth for other Non-Display
purposes would be subject to both fees.
However, subscribers who utilize BZX
Depth for other Non-Display purposes
and not within a Trading Platform
would be subject only to the proposed
fee for Non-Display Use.
Certain subscribers that use an
Exchange approved Managed NonDisplay Service Provider would be
exempt from proposed Non-Display
Usage Fee. To be approved as Managed
Non-Display Service Provider, the
Distributor must host subscriber’s
applications that utilize BZX Depth
must within the Managed Non-Display
Service Provider’s space/cage; fully
manage and control access to BZX
Depth, and not permit further
redistribution of the Exchange Data
internally or externally.11 In order to
qualify for the exemption, the subscriber
must meet the following requirements:
• Any subscriber applications that
utilize BZX Depth must be hosted
within the Managed Non-Display
Service Provider’s space/cage;
• the subscriber’s access to BZX
Depth is fully managed and controlled
by the Managed Non-Display Service
Provider, and no further redistribution
10 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://markets.cboe.com/us/equities/
membership/fee_schedule/bzx/.
11 See e.g., Securities Exchange Act Release No.
76900 at fn. 8 (January 14, 2016), 81 FR 3506
(January 21, 2016) (SR–NYSE–2016–02). In this
filing, the NYSE discontinued fees related to
managed non-display for NYSE OpenBook. Id.
PO 00000
Frm 00108
Fmt 4703
Sfmt 4703
of the Exchange Data internally or
externally is permitted; and
• the subscriber is supported solely
by one Managed Non-Display Service
Provider, is not hosted by multiple
Managed Non-Display Service
Providers, and does not have their own
data center-hosted environment that
also receives BZX Depth.
The Exchange intends to implement
the proposed fee changes on January 2,
2018.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the objectives of Section 6 of the Act,12
in general, and furthers the objectives of
Section 6(b)(4),13 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 that the
proposed rule change is consistent with
Section 11(A) of the Act 14 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,15 which provides that
any national securities exchange that
distributes information with respect to
quotations for or transactions in an NMS
stock do so on terms that are not
unreasonably discriminatory. In
adopting Regulation NMS, the
Commission granted self-regulatory
organizations and broker-dealers
increased authority and flexibility to
offer new and unique market data to the
public. It was believed that this
authority would expand the amount of
data available to consumers, and also
spur innovation and competition for the
provision of market data.
In addition, the proposed fees would
not permit unfair discrimination
because all of the Exchange’s
12 15
U.S.C. 78f.
U.S.C. 78f(b)(4).
14 15 U.S.C. 78k–1.
15 See 17 CFR 242.603.
13 15
E:\FR\FM\16JAN1.SGM
16JAN1
Federal Register / Vol. 83, No. 10 / Tuesday, January 16, 2018 / Notices
daltland on DSKBBV9HB2PROD with NOTICES
subscribers will be subject to the
proposed fees on an equivalent basis.
BZX Depth is distributed and purchased
on a voluntary basis, in that neither the
Exchange nor market data distributors
are required by any rule or regulation to
make this data available. Accordingly,
Distributors and Users can discontinue
use at any time and for any reason,
including due to an assessment of the
reasonableness of fees charged. Firms
have a wide variety of alternative
market data products from which to
choose, such as similar proprietary data
products offered by other exchanges and
consolidated data. Moreover, the
Exchange is not required to make any
proprietary data products available or to
offer any specific pricing alternatives to
any customers.
In addition, the fees that are the
subject of this rule filing are constrained
by competition. As explained below in
the Exchange’s Statement on Burden on
Competition, the existence of
alternatives to BZX Depth further
ensures that the Exchange cannot set
unreasonable fees, or fees that are
unreasonably discriminatory, when
subscribers can elect such alternatives.
That is, the Exchange competes with
other exchanges (and their affiliates)
that provide similar market data
products. If another exchange (or its
affiliate) were to charge less to
consolidate and distribute its similar
product than the Exchange charges to
consolidate and distribute BZX Depth,
prospective Users likely would not
subscribe to, or would cease subscribing
to, 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.16
16 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
VerDate Sep<11>2014
22:48 Jan 12, 2018
Jkt 244001
The proposed Non-Display fee for
usage other than through a Trading
Platform for BZX Depth is equitable and
reasonable as the Exchange believes the
proposed fee represents the value of the
data provided by the feed and its use by
market participants. The proposed fee
changes reflects changing trends in the
ways in which the industry uses market
data. The proposed fee comport with the
proliferation of the use of data for
various non-display purposes and by
non-display trading applications. It
recognizes industry changes that have
evolved as a result of numerous
technological advances, the advent of
trading algorithms and automated
trading, different investment patterns, a
plethora of new securities products,
unprecedented levels of trading,
decimalization, internationalization and
developments in portfolio analysis and
securities research. The Exchange
believes the proposed fee reflects the
value of the data provided.
The Exchange notes that fees for nondisplay use have become commonplace
in the industry. Several exchanges
impose them as does the UTP, CTA/CQ,
and OPRA Plans. In addition, the fee
proposed is less than similar fees
currently charged by other exchanges
for their depth-of-book data products.
For example, NYSE Arca, Inc. (‘‘NYSE
Arca’’) and the New York Stock
Exchange, Inc. (‘‘NYSE’’) charge $5,000
and $6,000 per month, respectively, for
its depth-of-book data used for nondisplay purposes.17
The proposed fee is also equitable and
reasonable in that it ensures that heavy
users of the BZX Depth pay an equitable
share of the total fees. Currently,
External Distributors pay higher fees
than Internal Distributors based upon
their assumed higher usage levels. The
Exchange believes that non-display
users are generally high users of the
data, using it to power a trading
algorithms and other trading relates
systems for millions or even billions of
trading messages per day.
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 website 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).
17 See the non-display fees for NYSE OpenBook
and NYSE ArcaBook in the NYSE and NYSE Arca
fee schedules available at https://www.nyxdata.com/
nysedata/default.aspx?tabid=518&folder=207656.
PO 00000
Frm 00109
Fmt 4703
Sfmt 4703
2239
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 is constrained by: (i) Competition
among exchanges, other trading
platforms, and Trade Reporting
Facilities (‘‘TRF’’) that compete with
each other in a variety of dimensions;
(ii) the existence of inexpensive realtime consolidated data and marketspecific data and free delayed data; and
(iii) the inherent contestability of the
market for proprietary data.
The Exchange and its market data
products are subject to significant
competitive forces and the proposed
fees represent responses to that
competition. To start, the Exchange
competes intensely for order flow. It
competes with the other national
securities exchanges that currently trade
equities, with electronic communication
networks, with quotes posted in
FINRA’s Alternative Display Facility,
with alternative trading systems, and
with securities firms that primarily
trade as principal with their customer
order flow.
In addition, BZX Depth competes
with a number of alternative products.
For instance, BZX Depth does not
provide a complete picture of all trading
activity in a security. Rather, the other
national securities exchanges, the
several TRFs of FINRA, and ECNs that
produce proprietary data all produce
trades and trade reports. Each is
currently permitted to produce depthof-book information products, and many
currently do, including Nasdaq, NYSE,
and NYSE Arca.
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
E:\FR\FM\16JAN1.SGM
16JAN1
2240
Federal Register / Vol. 83, No. 10 / Tuesday, January 16, 2018 / Notices
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, including existing similar
feeds by other exchanges, consolidated
data, and proprietary data from other
sources, ensures that the Exchange
cannot set unreasonable fees, or fees
that are unreasonably discriminatory,
when subscribers can elect these
alternatives or choose not to purchase a
specific proprietary data product if its
cost to purchase is not justified by the
returns any particular vendor or
subscriber would achieve through the
purchase.
The Exchange believes the adoption
of the fee for Non-Display Usage for
BZX Depth would increase competition
amongst the exchanges that offer depthof-book products. In addition, the
proposed Non-Display Usage fee is less
than similar fees currently charged by
the NYSE and NYSE Arca for their
depth-of-book data.18
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 19 and paragraph (f) of Rule
19b–4 thereunder.20 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
daltland on DSKBBV9HB2PROD with NOTICES
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:
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
CboeBZX–2017–018 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number CboeBZX–2017–018. This file
number should be included on the
subject line if email is used. To help the
Commission process and review your
comments more efficiently, please use
only one method. The Commission will
post all comments on the Commission’s
internet website (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 website 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.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number CboeBZX–2017–018 and
should be submitted on or before
February 6, 2018.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.21
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–00532 Filed 1–12–18; 8:45 am]
BILLING CODE 8011–01–P
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
18 See
supra note 17.
U.S.C. 78s(b)(3)(A).
20 17 CFR 240.19b–4(f).
19 15
VerDate Sep<11>2014
22:48 Jan 12, 2018
21 17
Jkt 244001
PO 00000
CFR 200.30–3(a)(12).
Frm 00110
Fmt 4703
Sfmt 4703
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–82474; File No. SR–Phlx–
2017–75]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Order Granting Approval of
a Proposed Rule Change To Amend
Rule 1009 To Modify the Criteria for
Listing an Option on an Underlying
Covered Security
January 9, 2018.
I. Introduction
On September 27, 2017, Nasdaq PHLX
LLC (‘‘Phlx’’ or ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’), pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Act’’) 1 and Rule
19b–4 thereunder,2 a proposed rule
change to amend the criteria for listing
an option on an underlying covered
security in Phlx Rule 1009, Commentary
.01. The proposed rule change was
published for comment in the Federal
Register on October 11, 2017.3 On
November 15, 2017 the Exchange
submitted a comment letter on the
proposed rule change.4 The Commission
received no other comment letters. On
November 22, 2017, pursuant to Section
19(b)(2) of the Act,5 the Commission
designated a longer period within which
to approve the proposed rule change,
disapprove the proposed rule change, or
institute proceedings to determine
whether the proposed rule change
should be disapproved.6 This order
approves the proposed rule change.
II. Description of the Proposal
The Exchange proposes to amend
Phlx Rule 1009, Commentary .01 to
modify the criteria for listing options on
an underlying security as defined in
Section 18(b)(1)(A) of the Securities Act
of 1933 (hereinafter ‘‘covered security’’).
In particular, the Exchange proposes to
modify Phlx Rule 1009, Commentary
.01(4)(i) which currently requires that to
list an option, the underlying covered
security has to have a market price of at
least $3.00 per share for the previous
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See Securities Exchange Act Release No. 81814
(Oct. 4, 2017), 82 FR 47254 (‘‘Notice’’).
4 See Letter to Brett J. Fields, Secretary,
Commission, from Sun Kim, Assistant General
Counsel, Exchange, dated November 15, 2017
(‘‘Exchange Letter’’).
5 15 U.S.C. 78s(b)(2).
6 See Securities Exchange Act Release No. 82147,
82 FR 47254 (November 25, 2017). The Commission
designated January 9, 2017, as the date by which
it should approve, disapprove, or institute
proceedings to determine whether the proposed
rule change should be disapproved.
2 17
E:\FR\FM\16JAN1.SGM
16JAN1
]]>Agencies
[Federal Register Volume 83, Number 10 (Tuesday, January 16, 2018)]
[Notices]
[Pages 2237-2240]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-00532]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-82475; File No. SR-CboeBZX-2017-018]
Self-Regulatory Organizations; Cboe BZX Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of a Proposed Rule Change Related to
Fees for the BZX Depth Market Data Product
January 9, 2018.
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 27, 2017, Cboe BZX Exchange, Inc. (the ``Exchange'' or
``BZX'') 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 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 introduce new fees for Non-Display Usage of BZX
Depth.
The text of the proposed rule change is available at the Exchange's
website at www.markets.cboe.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
[[Page 2238]]
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 introduce new fees for Non-Display Usage \5\ of 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.\6\ The Exchange currently charges subscribers
to BZX Depth a fee of $5,000 per month for Non-Display Usage of BZX
Depth by its Trading Platforms.\7\ 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.'' \8\ Trading Platforms include
registered National Securities Exchanges, Alternative Trading Systems
(``ATSs''), and Electronic Communications Networks (``ECNs'') as those
terms are defined in the Exchange Act and regulations and rules
thereunder. Previously, subscribers of BZX Depth that used the feed for
Non-Display purposes but did not utilize the feed within a Trading
Platform were charged the existing Distributors fees.
---------------------------------------------------------------------------
\5\ See the Exchange's fee schedule available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
\6\ See Exchange Rule 13.8(a).
\7\ A 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://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
\8\ See the Exchange's fee schedule available at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------
Forms of Non-Display Use include, but are not limited to,
algorithmic or automated trading, order routing, surveillance, order
management, risk management, clearance and settlement activities, and
account maintenance.\9\ Non-Display Usage does not include any use of
BZX Depth that relates solely to transportation, dissemination, and
redistribution of BZX Depth, or that results in the output of BZX Depth
solely for display. Non-display uses of data for non-trading purposes
benefits data recipients by allowing users to automate functions, to
achieve greater speed and accuracy, and to reduce costs of labor. While
some non-trading uses do not directly generate revenues, they can
substantially reduce a data recipient's costs by automating many
functions. Those functions can be carried out in a more efficient and
accurate manner, with reduced errors and labor costs.
---------------------------------------------------------------------------
\9\ See e.g., Nasdaq Rule IM-7023-1(c), U.S. Non-Display
Information.
---------------------------------------------------------------------------
The Exchange now proposes to adopt a separate fee of $2,000 per
month to cover other forms of Non-Display Usage other than through a
Trading Platform. The proposed fee would be assessed in addition to
existing Distributor \10\ fees and would supplement the existing Non-
Display Usage fee for Trading Platforms. Specifically, subscribers who
are subject to the Non-Display Usage by Trading Platform fee but also
utilize BZX Depth for other Non-Display purposes would be subject to
both fees. However, subscribers who utilize BZX Depth for other Non-
Display purposes and not within a Trading Platform would be subject
only to the proposed fee for Non-Display Use.
---------------------------------------------------------------------------
\10\ 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://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------
Certain subscribers that use an Exchange approved Managed Non-
Display Service Provider would be exempt from proposed Non-Display
Usage Fee. To be approved as Managed Non-Display Service Provider, the
Distributor must host subscriber's applications that utilize BZX Depth
must within the Managed Non-Display Service Provider's space/cage;
fully manage and control access to BZX Depth, and not permit further
redistribution of the Exchange Data internally or externally.\11\ In
order to qualify for the exemption, the subscriber must meet the
following requirements:
---------------------------------------------------------------------------
\11\ See e.g., Securities Exchange Act Release No. 76900 at fn.
8 (January 14, 2016), 81 FR 3506 (January 21, 2016) (SR-NYSE-2016-
02). In this filing, the NYSE discontinued fees related to managed
non-display for NYSE OpenBook. Id.
---------------------------------------------------------------------------
Any subscriber applications that utilize BZX Depth must be
hosted within the Managed Non-Display Service Provider's space/cage;
the subscriber's access to BZX Depth is fully managed and
controlled by the Managed Non-Display Service Provider, and no further
redistribution of the Exchange Data internally or externally is
permitted; and
the subscriber is supported solely by one Managed Non-
Display Service Provider, is not hosted by multiple Managed Non-Display
Service Providers, and does not have their own data center-hosted
environment that also receives BZX Depth.
The Exchange intends to implement the proposed fee changes on
January 2, 2018.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the objectives of Section 6 of the Act,\12\ in general, and
furthers the objectives of Section 6(b)(4),\13\ 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.
---------------------------------------------------------------------------
\12\ 15 U.S.C. 78f.
\13\ 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 \14\ 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,\15\ 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.
---------------------------------------------------------------------------
\14\ 15 U.S.C. 78k-1.
\15\ See 17 CFR 242.603.
---------------------------------------------------------------------------
In addition, the proposed fees would not permit unfair
discrimination because all of the Exchange's
[[Page 2239]]
subscribers will be subject to the proposed fees on an equivalent
basis. BZX Depth is distributed and purchased on a voluntary basis, in
that neither the Exchange nor market data distributors are required by
any rule or regulation to make this data available. Accordingly,
Distributors and Users can discontinue use at any time and for any
reason, including due to an assessment of the reasonableness of fees
charged. Firms have a wide variety of alternative market data products
from which to choose, such as similar proprietary data products offered
by other exchanges and consolidated data. Moreover, the Exchange is not
required to make any proprietary data products available or to offer
any specific pricing alternatives to any customers.
In addition, the fees that are the subject of this rule filing are
constrained by competition. As explained below in the Exchange's
Statement on Burden on Competition, the existence of alternatives to
BZX Depth further ensures that the Exchange cannot set unreasonable
fees, or fees that are unreasonably discriminatory, when subscribers
can elect such alternatives. That is, the Exchange competes with other
exchanges (and their affiliates) that provide similar market data
products. If another exchange (or its affiliate) were to charge less to
consolidate and distribute its similar product than the Exchange
charges to consolidate and distribute BZX Depth, prospective Users
likely would not subscribe to, or would cease subscribing to, 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.\16\
---------------------------------------------------------------------------
\16\ 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 website 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).
---------------------------------------------------------------------------
The proposed Non-Display fee for usage other than through a Trading
Platform for BZX Depth is equitable and reasonable as the Exchange
believes the proposed fee represents the value of the data provided by
the feed and its use by market participants. The proposed fee changes
reflects changing trends in the ways in which the industry uses market
data. The proposed fee comport with the proliferation of the use of
data for various non-display purposes and by non-display trading
applications. It recognizes industry changes that have evolved as a
result of numerous technological advances, the advent of trading
algorithms and automated trading, different investment patterns, a
plethora of new securities products, unprecedented levels of trading,
decimalization, internationalization and developments in portfolio
analysis and securities research. The Exchange believes the proposed
fee reflects the value of the data provided.
The Exchange notes that fees for non-display use have become
commonplace in the industry. Several exchanges impose them as does the
UTP, CTA/CQ, and OPRA Plans. In addition, the fee proposed is less than
similar fees currently charged by other exchanges for their depth-of-
book data products. For example, NYSE Arca, Inc. (``NYSE Arca'') and
the New York Stock Exchange, Inc. (``NYSE'') charge $5,000 and $6,000
per month, respectively, for its depth-of-book data used for non-
display purposes.\17\
---------------------------------------------------------------------------
\17\ See the non-display fees for NYSE OpenBook and NYSE
ArcaBook in the NYSE and NYSE Arca fee schedules available at https://www.nyxdata.com/nysedata/default.aspx?tabid=518&folder=207656.
---------------------------------------------------------------------------
The proposed fee is also equitable and reasonable in that it
ensures that heavy users of the BZX Depth pay an equitable share of the
total fees. Currently, External Distributors pay higher fees than
Internal Distributors based upon their assumed higher usage levels. The
Exchange believes that non-display users are generally high users of
the data, using it to power a trading algorithms and other trading
relates systems for millions or even billions of trading messages per
day.
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 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 Depth competes with a number of alternative
products. For instance, BZX Depth does not provide a complete picture
of all trading activity in a security. Rather, the other national
securities exchanges, the several TRFs of FINRA, and ECNs that produce
proprietary data all produce trades and trade reports. Each is
currently permitted to produce depth-of-book information products, and
many currently do, including Nasdaq, NYSE, and NYSE Arca.
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
[[Page 2240]]
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,
including existing similar feeds by other exchanges, consolidated data,
and proprietary data from other sources, ensures that the Exchange
cannot set unreasonable fees, or fees that are unreasonably
discriminatory, when subscribers can elect these alternatives or choose
not to purchase a specific proprietary data product if its cost to
purchase is not justified by the returns any particular vendor or
subscriber would achieve through the purchase.
The Exchange believes the adoption of the fee for Non-Display Usage
for BZX Depth would increase competition amongst the exchanges that
offer depth-of-book products. In addition, the proposed Non-Display
Usage fee is less than similar fees currently charged by the NYSE and
NYSE Arca for their depth-of-book data.\18\
---------------------------------------------------------------------------
\18\ See supra note 17.
---------------------------------------------------------------------------
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 \19\ and paragraph (f) of Rule 19b-4
thereunder.\20\ 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.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78s(b)(3)(A).
\20\ 17 CFR 240.19b-4(f).
---------------------------------------------------------------------------
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-CboeBZX-2017-018 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number CboeBZX-2017-018. This file
number should be included on the subject line if email is used. To help
the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (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 website 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. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number CboeBZX-2017-018 and should be submitted on
or before February 6, 2018.
---------------------------------------------------------------------------
\21\ 17 CFR 200.30-3(a)(12).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\21\
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-00532 Filed 1-12-18; 8:45 am]
BILLING CODE 8011-01-P
