Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Amend the NYSE Proprietary Market Data Fee Schedule Regarding the NYSE Best Quote and Trades Market Data Feed, 26511-26514 [2018-12194]
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Federal Register / Vol. 83, No. 110 / Thursday, June 7, 2018 / Notices
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Rule 17f–2’s requirement that
directors designate access persons is
intended to ensure that directors
evaluate the trustworthiness of insiders
who handle fund assets. The
requirements that access persons act
jointly in handling fund assets, prepare
a written notation of each transaction,
and transmit the notation to another
designated person are intended to
reduce the risk of misappropriation of
fund assets by access persons, and to
ensure that adequate records are
prepared, reviewed by a responsible
third person, and available for
examination by the Commission. The
requirement that auditors verify fund
assets without notice twice each year is
intended to provide an additional
deterrent to the misappropriation of
fund assets and to detect any
irregularities.
The Commission staff estimates that
each fund makes 974 responses and
spends an average of 252 hours annually
in complying with the rule’s
requirements.3 Commission staff
estimates that on an annual basis it
takes: (i) 0.5 hours of fund accounting
personnel at a total cost of $102 to draft
director resolutions; 4 (ii) 0.5 hours of
the fund’s board of directors at a total
cost of $2,233 to adopt the resolution; 5
(iii) 244 hours for the fund’s accounting
personnel at a total cost of $65,745 to
prepare written notations of
transactions; 6 and (iv) 7 hours for the
fund’s accounting personnel at a total
cost of $1,428 to assist the independent
public accountants when they perform
3 The 974 responses are: 1 (one) response to draft
and adopt the resolution and 973 notations.
Estimates of the number of hours are based on
conversations with individuals in the fund
industry. The actual number of hours may vary
significantly depending on individual fund assets.
4 This estimate is based on the following
calculation: 0.5 (burden hours per fund) × $204
(senior accountant’s hourly rate) = $102. Unless
otherwise indicated, the hourly wage figures used
herein are from the Securities Industry and
Financial Markets Association’s Management &
Professional Earnings in the Securities Industry
2013, modified by Commission staff to account for
an 1800-hour work-year and inflation, and
multiplied by 5.35 to account for bonuses, firm size,
employee benefits and overhead.
5 The estimate for the cost of board time as a
whole is derived from estimates made by the staff
regarding typical board size and compensation that
is based on information received from fund
representatives and publicly available sources.
6 Respondents estimated that each fund makes
974 responses on an annual basis and spends a total
of 0.25 hours per response. The fund personnel
involved are Accounts Payable Manager ($192
hourly rate), Operations Manager ($345 hourly rate)
and Accounting Manager ($274 hourly rate). The
average hourly rate of these personnel is $270. The
estimated cost of preparing notations is based on
the following calculation: 974 × 0.25 × $270 =
$65,745.
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verifications of fund assets.7
Commission staff estimates that
approximately 206 funds file Form N–
17f–2 each year.8 Thus, the total annual
hour burden for rule 17f–2 is estimated
to be 51,912 hours.9 Based on the total
costs per fund listed above, the total
cost of rule 17f–2’s collection of
information requirements is estimated
to be approximately $13.5 million.10
The estimate of average burden hours
is made solely for the purposes of the
Paperwork Reduction Act, and is not
derived from a comprehensive or even
a representative survey or study of the
costs of Commission rules and forms.
Complying with the collections of
information required by rule 17f–2 is
mandatory for those funds that maintain
custody of their own assets. Responses
will not be kept confidential. 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.
The public may view the background
documentation for this information
collection at the following website,
www.reginfo.gov. Comments should be
directed to: (i) Desk Officer for the
Securities and Exchange Commission,
Office of Information and Regulatory
Affairs, Office of Management and
Budget, Room 10102, New Executive
Office Building, Washington, DC 20503,
or by sending an email to: Shagufta_
Ahmed@omb.eop.gov; and (ii) Pamela
Dyson, Director/Chief Information
Officer, Securities and Exchange
Commission, c/o Remi Pavlik-Simon,
100 F Street NE, Washington, DC 20549
or send an email to: PRA_Mailbox@
sec.gov. Comments must be submitted to
OMB within 30 days of this notice.
Dated: June 1, 2018.
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–12192 Filed 6–6–18; 8:45 am]
BILLING CODE 8011–01–P
7 This estimate is based on the following
calculation: 7 × $204 (senior accountant’s hourly
rate) = $1,428.
8 On average, each year approximately 206 funds
filed Form N–17f–2 with the Commission during
calendar years 2015–2017.
9 This estimate is based on the following
calculation: 206 (funds) × 252 (total annual hourly
burden per fund) = 51,912 hours for rule. The
annual burden for rule 17f–2 does not include time
spent preparing Form N–17f–2. The burden for
Form N–17f–2 is included in a separate collection
of information.
10 This estimate is based on the following
calculation: $65,745 (total annual cost per fund) ×
206 funds = $13,543,470.
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26511
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–83360; File No. SR–NYSE–
2018–24]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change To Amend the
NYSE Proprietary Market Data Fee
Schedule Regarding the NYSE Best
Quote and Trades Market Data Feed
June 1, 2018.
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 May 21,
2018, New York Stock Exchange LLC
(‘‘NYSE’’ or the ‘‘Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the 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 the Substance
of the Proposed Rule Change
The Exchange proposes to amend the
NYSE Proprietary Market Data Fee
Schedule (‘‘Fee Schedule’’) regarding
the NYSE Best Quote and Trades
(‘‘BQT’’) market data feed. The
Exchange proposes to make the fee
change effective May 21, 2018. The
proposed rule change is available on the
Exchange’s website 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.
1 15
U.S.C. 78s(b)(1).
U.S.C. 78a.
3 17 CFR 240.19b–4.
2 15
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Federal Register / Vol. 83, No. 110 / Thursday, June 7, 2018 / Notices
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
Fee Schedule regarding the NYSE BQT
market data feed. The NYSE BQT data
feed provides best bid and offer and last
sale information for the Exchange and
its affiliates, NYSE Arca, Inc. (‘‘NYSE
Arca’’) and NYSE American LLC
(‘‘NYSE American’’).4 In connection
with the re-launch of operations of
another affiliate of the Exchange, NYSE
National, Inc. (‘‘NYSE National’’), the
Exchange recently filed a proposed rule
change to amend the content of the
NYSE BQT market data feed 5 to include
NYSE National BBO and NYSE National
Trades market data feeds.6
The Exchange currently charges an
access fee of $250 per month for the
NYSE BQT data feed. The Exchange is
not proposing any change to the access
fee. The purpose of this filing is to
amend footnote 5 to the Fee Schedule to
provide that to subscribe to NYSE BQT,
subscribers must also subscribe to, and
pay applicable fees for, NYSE National
BBO and NYSE Trades in addition to
subscribing to, and paying for, NYSE
BBO, NYSE Trades, NYSE Arca BBO,
NYSE Arca Trades, NYSE American
BBO and NYSE American Trades.
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2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,7
in general, and Sections 6(b)(4) and
6(b)(5) of the Act,8 in particular, in that
it provides an equitable allocation of
reasonable fees among its members,
issuers, and other persons using its
facilities and is not designed to permit
unfair discrimination among customers,
issuers, brokers, or dealers. The
Exchange also believes that the
proposed rule change is consistent with
Section 11(A) of the Act 9 in that it is
consistent with (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
4 See Securities Exchange Act Release No. 34–
73553 (Nov. 6, 2014), 79 FR 67491 (Nov. 13, 2014)
(SR–NYSE–2014–40) (‘‘NYSE BQT Approval
Order’’).
5 See SR–NYSE–2018–22.
6 See SR–NYSENat–2018–09.
7 15 U.S.C. 78f(b).
8 15 U.S.C. 78f(b)(4), (5).
9 15 U.S.C. 78k–1.
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securities. Furthermore, the proposed
rule change is consistent with Rule 603
of Regulation NMS,10 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.
The Exchange further believes that
requiring market data recipients to
separately subscribe to and pay for the
eight underlying data feeds to NYSE
BQT is reasonable because by design,
NYSE BQT represents an aggregated and
consolidated version of those existing
eight data feeds. The Exchange notes
that it is not seeking with this filing to
establish fees relating to the underlying
BBO and Trades data feeds, as those fees
have already been established consistent
with Section 19(b)(3)(A) of the Act 11
and Rule 19b–4(f)(2) 12 thereunder, and
which may be amended from time to
time. However, the Exchange believes it
would be unfair if it did not require
NYSE BQT data feed recipients to
separately subscribe to and pay for those
underlying feeds because otherwise,
NYSE BQT data feed recipients would
be receiving a data product that
includes such underlying data at a
lower cost than separately subscribing
to the underlying data feeds. The
Exchange therefore believes that the fee
structure for NYSE BQT would not be
lower than the cost to another party to
create a comparable product, including
the cost of receiving the underlying data
feeds.
The Exchange further believes that the
proposed NYSE BQT fee structure is
equitable and not unfairly
discriminatory because all vendors and
subscribers that elect to purchase NYSE
BQT would be subject to the same fees.
In addition, vendors and subscribers
that do not wish to purchase NYSE BQT
may separately purchase the individual
underlying data feed, and if they so
choose, perform a similar aggregation
and consolidation function that the
Exchange performs in creating NYSE
BQT. To enable such competition, the
Exchange would continue to offer NYSE
BQT on terms that a subscriber of the
underlying feeds could offer a
competing product if it so chooses.
The Exchange also notes that the use
of NYSE BQT is entirely optional. Firms
have a wide variety of alternative
market data products from which to
choose, including the Exchanges’ own
underlying data products, and
proprietary data products offered by the
Exchange’s competitors, and
10 See
17 CFR 242.603.
U.S.C. 78s(b)(3)(A).
12 17 CFR 240.19b–4(f)(2).
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.
As explained below in the Exchange’s
Statement on Burden on Competition,
the existence of alternatives to these
data products 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 ‘‘best quote and
trade’’ 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
NYSE BQT, prospective users likely
would not subscribe to, or would cease
subscribing to, NYSE BQT. In addition,
the Exchange would compete with
unaffiliated market data vendors who
would be in a position to consolidate
and distribute the same data that
comprises the NYSE BQT feed into the
vendor’s own comparable market data
product. If the third-party vendor is able
to provide the exact same data for a
lower cost, prospective users would
avail themselves of that lower cost and
elect not to take NYSE BQT.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,13 the Exchange does not believe
that the proposed rule change will
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
As noted above, the NYSE BQT data
feed represents aggregated and
consolidated information of eight
existing market data feeds. Although the
Exchange, NYSE Arca, NYSE American
and NYSE National are the exclusive
distributors of the underlying BBO and
Trades feeds from which certain data
elements are taken to create NYSE BQT,
the Exchange may not be the exclusive
distributor of the aggregated and
consolidated information that comprises
the NYSE BQT data feed. Any other
market data recipient of the underlying
data feeds would be able, if they chose,
to create a data feed with the same
information as NYSE BQT and
distribute it to their clients on a level
playing field with respect to latency and
cost as compared to the Exchange’s
product.
The market for proprietary data
products is competitive and inherently
11 15
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U.S.C. 78f(b)(8).
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contestable because there is fierce
competition for the inputs necessary for
the creation of proprietary data and
strict pricing discipline for the
proprietary products themselves.
Numerous exchanges compete with one
another for listings and order flow and
sales of market data itself, providing
ample opportunities for entrepreneurs
who wish to compete in any or all of
those areas, including producing and
distributing their own market data.
Proprietary data products are produced
and distributed by each individual
exchange, as well as other entities, in a
vigorously competitive market. Indeed,
the U.S. Department of Justice (‘‘DOJ’’)
(the primary antitrust regulator) has
expressly acknowledged the aggressive
actual competition among exchanges,
including for the sale of proprietary
market data. In 2011, the DOJ stated that
exchanges ‘‘compete head to head to
offer real-time equity data products.
These data products include the best bid
and offer of every exchange and
information on each equity trade,
including the last sale.’’ 14
Moreover, competitive markets for
listings, order flow, executions, and
transaction reports impose pricing
discipline for the inputs of proprietary
data products and therefore constrain
markets from overpricing proprietary
market data. Broker-dealers send their
order flow and transaction reports to
multiple venues, rather than providing
them all to a single venue, which in turn
reinforces this competitive constraint.
As a 2010 Commission Concept Release
noted, the ‘‘current market structure can
be described as dispersed and complex’’
with ‘‘trading volume . . . dispersed
among many highly automated trading
centers that compete for order flow in
the same stocks’’ and ‘‘trading centers
offer[ing] a wide range of services that
are designed to attract different types of
market participants with varying trading
needs.’’ 15 More recently, former SEC
14 ‘‘Press Release, U.S. Department of Justice,
Assistant Attorney General Christine Varney Holds
Conference Call Regarding NASDAQ OMX Group
Inc. and IntercontinentalExchange Inc. Abandoning
Their Bid for NYSE Euronext (May 16, 2011),
available at https://www.justice.gov/iso/opa/atr/
speeches/2011/at-speech-110516.html; see also
Complaint in U.S. v. Deutsche Borse AG and NYSE
Euronext, Case No. 11–cv–2280 (D.C. Dist.) ¶ 24
(‘‘NYSE and Direct Edge compete head-to-head . . .
in the provision of real-time proprietary equity data
products.’’).
15 Concept Release on Equity Market Structure,
Securities Exchange Act Release No. 61358 (Jan. 14,
2010), 75 FR 3594 (Jan. 21, 2010) (File No. S7–02–
10). This Concept Release included data from the
third quarter of 2009 showing that no market center
traded more than 20% of the volume of listed
stocks, further evidencing the dispersal of and
competition for trading activity. Id. at 3598. Data
available on ArcaVision show that from June 30,
2013 to June 30, 2014, no exchange traded more
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Chair Mary Jo White reported that
competition for order flow in exchangelisted equities is ‘‘intense’’ and divided
among many trading venues, including
exchanges, more than 40 alternative
trading systems, and more than 250
broker-dealers.16 And as the
Commission’s own Chief Administrative
Law Judge found after considering
extensive fact and expert testimony and
documentary evidence on the subject,
‘‘there is fierce competition for trading
services (or ‘order flow’)’’ among
exchanges, and ‘‘the record evidence
shows that competition plays a
significant role in restraining exchange
pricing of depth-of-book products.’’ In
the Matter of the Application of
Securities Industry And Financial
Markets Association For Review of
Actions Taken By Self-Regulatory
Organizations, Initial Decision Release
No. 1015, Administrative Proceeding
File No. 3–15350 (June 1, 2016), at pp.
8 and 33.
If an exchange succeeds in competing
for quotations, order flow, and trade
executions, then it earns trading
revenues and increases the value of its
proprietary market data products
because they will contain greater quote
and trade information. Conversely, if an
exchange is less successful in attracting
quotes, order flow, and trade
executions, then its market data
products may be less desirable to
customers in light of the diminished
content and data products offered by
competing venues may become more
attractive. Thus, competition for
quotations, order flow, and trade
executions puts significant pressure on
an exchange to maintain both execution
and data fees at reasonable levels.
In addition, in the case of products
that are also redistributed through
market data vendors, such as Bloomberg
and Thompson Reuters, the vendors
themselves provide additional price
discipline for proprietary data products
because they control the primary means
of access to certain end users. These
vendors impose price discipline based
upon their business models. For
example, vendors that assess a
surcharge on data they sell are able to
refuse to offer proprietary products that
their end users do not or will not
than 12% of the volume of listed stocks by either
trade or dollar volume, further evidencing the
continued dispersal of and fierce competition for
trading activity. See https://www.arcavision.com/
Arcavision/arcalogin.jsp.
16 Mary Jo White, Enhancing Our Equity Market
Structure, Sandler O’Neill & Partners, L.P. Global
Exchange and Brokerage Conference (June 5, 2014)
(available on the Commission website), citing
Tuttle, Laura, 2014, ‘‘OTC Trading: Description of
Non-ATS OTC Trading in National Market System
Stocks,’’ at 7–8.
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26513
purchase in sufficient numbers. Vendors
will not elect to make NYSE BQT
available unless their customers request
it, and customers will not elect to pay
for NYSE BQT unless the product can
provide value by sufficiently increasing
revenues or reducing costs in the
customer’s business in a manner that
will offset the fees. All of these factors
operate as constraints on pricing
proprietary data products.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective
upon filing pursuant to Section
19(b)(3)(A) 17 of the Act and
subparagraph (f)(2) of Rule 19b–4 18
thereunder, because it establishes a due,
fee, or other charge imposed by the
Exchange.
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 19 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
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–
NYSE–2018–24 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
17 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
19 15 U.S.C. 78s(b)(2)(B).
18 17
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Federal Register / Vol. 83, No. 110 / Thursday, June 7, 2018 / Notices
Commission, 100 F Street NE,
Washington, DC 20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
All submissions should refer to File
Number SR–NYSE–2018–24. 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 SR–NYSE–2018–24, and
should be submitted on or before June
28, 2018.
[Release No. 34–83362; File No. SR–FICC–
2018–001]
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.20
Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018–12194 Filed 6–6–18; 8:45 am]
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BILLING CODE 8011–01–P
20 17
CFR 200.30–3(a)(12).
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Self-Regulatory Organizations; Fixed
Income Clearing Corporation; Notice of
Filing of Amendment No. 1 and Order
Granting Accelerated Approval of a
Proposed Rule Change, as Modified by
Amendment No. 1, To Implement
Changes to the Required Fund Deposit
Calculation in the Government
Securities Division Rulebook
June 1, 2018.
I. Introduction
The Fixed Income Clearing
Corporation (‘‘FICC’’) filed with the U.S.
Securities and Exchange Commission
(‘‘Commission’’) on January 12, 2018
proposed rule change SR–FICC–2018–
001 (‘‘Proposed Rule Change’’) pursuant
to Section 19(b)(1) of the Securities
Exchange Act of 1934 (‘‘Exchange
Act’’) 1 and Rule 19b–4 thereunder.2 The
Proposed Rule Change was published
for comment in the Federal Register on
February 1, 2018.3 The Commission
received eight comments on the
proposal.4 On March 14, 2018, the
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4. FICC also filed the Proposed
Rule Change as advance notice SR–FICC–2018–801
(‘‘Advance Notice’’) pursuant to Section 806(e)(1) of
the Payment, Clearing, and Settlement Supervision
Act of 2010, 12 U.S.C. 5465(e)(1), and Rule 19b–
4(n)(1)(i) under the Exchange Act, 17 CFR 240.19b–
4(n)(1)(i). Notice of Filing of the Advance Notice
was published for comment in the Federal Register
on March 2, 2018. Securities Exchange Act Release
No. 82779 (February 26, 2018), 83 FR 9055 (March
2, 2018) (SR–FICC–2018–801). The Commission
extended the deadline for its review period of the
Advance Notice for an additional 60 days on March
7, 2018. Securities Exchange Act Release No. 82820
(March 7, 2018), 83 FR 10761 (March 12, 2018) (SR–
FICC–2018–801). On April 25, 2018, FICC filed
Amendment No.1 to the Advance Notice. Available
at https://www/sec/gov/comments/sr-ficc-2018-801/
ficc2018801.htm. The Commission issued a notice
of filing of Amendment No. 1 and notice of no
objection to the Advance Notice, as modified by
Amendment No. 1, on May 11, 2018. Securities
Exchange Act Release No. 83223 (May 11, 2018), 83
FR 23020 (May 17, 2018).
3 Securities Exchange Act Release No. 82588
(January 26, 2018), 83 FR 4687 (February 1, 2018)
(SR–FICC–2018–001).
4 Letter from Robert E. Pooler, Chief Financial
Officer, Ronin Capital LLC (‘‘Ronin’’), dated
February 22, 2018, to Robert W. Errett, Deputy
Secretary, Commission (‘‘Ronin Letter I’’); letter
from Michael Santangelo, Chief Financial Officer,
Amherst Pierpont Securities LLC (‘‘Amherst’’),
dated February 22, 2018, to Brent J. Fields,
Secretary, Commission (‘‘Amherst Letter I’’); letter
from Timothy Cuddihy, Managing Director, FICC,
dated March 19, 2018, to Robert W. Errett, Deputy
Secretary, Commission (‘‘FICC Letter I’’); letter from
James Tabacchi, Chairman, Independent Dealer and
Trader Association (‘‘IDTA’’), dated March 29,
2018, to Eduardo A. Aleman, Assistant Secretary,
Commission (‘‘IDTA Letter’’); letter from Michael
Santangelo, Chief Financial Officer, Amherst
2 17
PO 00000
Frm 00105
Fmt 4703
Sfmt 4703
Commission issued an order instituting
proceedings to determine whether to
approve or disapprove the Proposed
Rule Change.5 On April 25, 2018, FICC
filed Amendment No. 1 to the Proposed
Rule Change (‘‘Amendment No. 1’’).6
The Commission is publishing this
notice to solicit comment on
Amendment No. 1 from interested
persons and to approve the Proposed
Rule Change, as modified by
Amendment No. 1, on an accelerated
basis.
II. Description of the Proposed Rule
Change
FICC proposes to change the FICC
GSD Rulebook (‘‘GSD Rules’’) 7 to adjust
GSD’s method of calculating GSD
netting members’ (‘‘Members’’) margin.8
Specifically, FICC proposes to (1)
change GSD’s method of calculating the
Value-at-Risk (‘‘VaR’’) Charge
component; (2) add a new component
referred to as the ‘‘Blackout Period
Exposure Adjustment;’’ (3) eliminate the
existing Blackout Period Exposure
Charge and the Coverage Charge
components; (4) adjust the existing
Backtesting Charge component to (i)
include the backtesting deficiencies of
certain GCF Repo Transaction 9
counterparties during the Blackout
Period, and (ii) give GSD the ability to
assess the Backtesting Charge on an
intraday basis for all Members; and (5)
adjust the calculation for determining
Pierpont Securities LLC, dated April 4, 2018, to
Brent J. Fields, Secretary, Commission (‘‘Amherst
Letter II’’); letter from Levent Kahraman, Chief
Executive Officer, KGS-Alpha Capital Markets
(‘‘KGS’’), dated April 4, 2018, to Brent J. Fields,
Secretary, Commission (‘‘KGS Letter’’); letter from
Timothy Cuddihy, Managing Director, FICC, dated
April 13, 2018, to Robert W. Errett, Deputy
Secretary, Commission (‘‘FICC Letter II’’); and letter
from Robert E. Pooler, Chief Financial Officer,
Ronin, dated April 13, 2018, to Eduardo A. Aleman,
Assistant Secretary, Commission (‘‘Ronin Letter
II’’). Since the proposal contained in the Proposed
Rule Change was also filed as an Advance Notice,
supra note 2, the Commission is considering all
public comments received on the proposal
regardless of whether the comments were submitted
to the Advance Notice or the Proposed Rule
Change.
5 See Securities Exchange Act Release No. 34–
82876 (March 14, 2018), 83 FR 12229 (March 20,
2018) (SR–FICC–2018–001). The order instituting
proceedings re-opened the comment period and
extended the Commission’s period of review of the
Proposed Rule Change. See id.
6 Available at https://www.sec.gov/comments/srficc-2018-001/ficc2018001.htm. FICC filed related
amendments to the related Advance Notice. Supra
note 2.
7 Available at https://www.dtcc.com/legal/rulesand-procedures.
8 Notice, supra note 3, at 4688.
9 GCF Repo Transactions refer to transactions
made on FICC’s GCF Repo Service that enable
dealers to trade general collateral repos, based on
rate, term, and underlying product, throughout the
day, without requiring intra-day, trade-for-trade
settlement on a Delivery-versus-Payment basis. Id.
E:\FR\FM\07JNN1.SGM
07JNN1
]]>Agencies
[Federal Register Volume 83, Number 110 (Thursday, June 7, 2018)]
[Notices]
[Pages 26511-26514]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2018-12194]
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SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-83360; File No. SR-NYSE-2018-24]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change To
Amend the NYSE Proprietary Market Data Fee Schedule Regarding the NYSE
Best Quote and Trades Market Data Feed
June 1, 2018.
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 May 21, 2018, New York Stock Exchange LLC (``NYSE'' or
the ``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. 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\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
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I. Self-Regulatory Organization's Statement of the Terms of the
Substance of the Proposed Rule Change
The Exchange proposes to amend the NYSE Proprietary Market Data Fee
Schedule (``Fee Schedule'') regarding the NYSE Best Quote and Trades
(``BQT'') market data feed. The Exchange proposes to make the fee
change effective May 21, 2018. The proposed rule change is available on
the Exchange's website 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.
[[Page 26512]]
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 Fee Schedule regarding the NYSE
BQT market data feed. The NYSE BQT data feed provides best bid and
offer and last sale information for the Exchange and its affiliates,
NYSE Arca, Inc. (``NYSE Arca'') and NYSE American LLC (``NYSE
American'').\4\ In connection with the re-launch of operations of
another affiliate of the Exchange, NYSE National, Inc. (``NYSE
National''), the Exchange recently filed a proposed rule change to
amend the content of the NYSE BQT market data feed \5\ to include NYSE
National BBO and NYSE National Trades market data feeds.\6\
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\4\ See Securities Exchange Act Release No. 34-73553 (Nov. 6,
2014), 79 FR 67491 (Nov. 13, 2014) (SR-NYSE-2014-40) (``NYSE BQT
Approval Order'').
\5\ See SR-NYSE-2018-22.
\6\ See SR-NYSENat-2018-09.
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The Exchange currently charges an access fee of $250 per month for
the NYSE BQT data feed. The Exchange is not proposing any change to the
access fee. The purpose of this filing is to amend footnote 5 to the
Fee Schedule to provide that to subscribe to NYSE BQT, subscribers must
also subscribe to, and pay applicable fees for, NYSE National BBO and
NYSE Trades in addition to subscribing to, and paying for, NYSE BBO,
NYSE Trades, NYSE Arca BBO, NYSE Arca Trades, NYSE American BBO and
NYSE American Trades.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\7\ in general, and
Sections 6(b)(4) and 6(b)(5) of the Act,\8\ in particular, in that it
provides an equitable allocation of reasonable fees among its members,
issuers, and other persons using its facilities and is not designed to
permit unfair discrimination among customers, issuers, brokers, or
dealers. The Exchange also believes that the proposed rule change is
consistent with Section 11(A) of the Act \9\ in that it is consistent
with (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,\10\ 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.
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\7\ 15 U.S.C. 78f(b).
\8\ 15 U.S.C. 78f(b)(4), (5).
\9\ 15 U.S.C. 78k-1.
\10\ See 17 CFR 242.603.
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The Exchange further believes that requiring market data recipients
to separately subscribe to and pay for the eight underlying data feeds
to NYSE BQT is reasonable because by design, NYSE BQT represents an
aggregated and consolidated version of those existing eight data feeds.
The Exchange notes that it is not seeking with this filing to establish
fees relating to the underlying BBO and Trades data feeds, as those
fees have already been established consistent with Section 19(b)(3)(A)
of the Act \11\ and Rule 19b-4(f)(2) \12\ thereunder, and which may be
amended from time to time. However, the Exchange believes it would be
unfair if it did not require NYSE BQT data feed recipients to
separately subscribe to and pay for those underlying feeds because
otherwise, NYSE BQT data feed recipients would be receiving a data
product that includes such underlying data at a lower cost than
separately subscribing to the underlying data feeds. The Exchange
therefore believes that the fee structure for NYSE BQT would not be
lower than the cost to another party to create a comparable product,
including the cost of receiving the underlying data feeds.
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\11\ 15 U.S.C. 78s(b)(3)(A).
\12\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
The Exchange further believes that the proposed NYSE BQT fee
structure is equitable and not unfairly discriminatory because all
vendors and subscribers that elect to purchase NYSE BQT would be
subject to the same fees. In addition, vendors and subscribers that do
not wish to purchase NYSE BQT may separately purchase the individual
underlying data feed, and if they so choose, perform a similar
aggregation and consolidation function that the Exchange performs in
creating NYSE BQT. To enable such competition, the Exchange would
continue to offer NYSE BQT on terms that a subscriber of the underlying
feeds could offer a competing product if it so chooses.
The Exchange also notes that the use of NYSE BQT is entirely
optional. Firms have a wide variety of alternative market data products
from which to choose, including the Exchanges' own underlying data
products, and proprietary data products offered by the Exchange's
competitors, 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.
As explained below in the Exchange's Statement on Burden on
Competition, the existence of alternatives to these data products
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 ``best quote and
trade'' 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 NYSE BQT,
prospective users likely would not subscribe to, or would cease
subscribing to, NYSE BQT. In addition, the Exchange would compete with
unaffiliated market data vendors who would be in a position to
consolidate and distribute the same data that comprises the NYSE BQT
feed into the vendor's own comparable market data product. If the
third-party vendor is able to provide the exact same data for a lower
cost, prospective users would avail themselves of that lower cost and
elect not to take NYSE BQT.
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\13\ the Exchange
does not believe that the proposed rule change will impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of the Act. As noted above, the NYSE BQT data feed
represents aggregated and consolidated information of eight existing
market data feeds. Although the Exchange, NYSE Arca, NYSE American and
NYSE National are the exclusive distributors of the underlying BBO and
Trades feeds from which certain data elements are taken to create NYSE
BQT, the Exchange may not be the exclusive distributor of the
aggregated and consolidated information that comprises the NYSE BQT
data feed. Any other market data recipient of the underlying data feeds
would be able, if they chose, to create a data feed with the same
information as NYSE BQT and distribute it to their clients on a level
playing field with respect to latency and cost as compared to the
Exchange's product.
---------------------------------------------------------------------------
\13\ 78 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
The market for proprietary data products is competitive and
inherently
[[Page 26513]]
contestable because there is fierce competition for the inputs
necessary for the creation of proprietary data and strict pricing
discipline for the proprietary products themselves. Numerous exchanges
compete with one another for listings and order flow and sales of
market data itself, providing ample opportunities for entrepreneurs who
wish to compete in any or all of those areas, including producing and
distributing their own market data. Proprietary data products are
produced and distributed by each individual exchange, as well as other
entities, in a vigorously competitive market. Indeed, the U.S.
Department of Justice (``DOJ'') (the primary antitrust regulator) has
expressly acknowledged the aggressive actual competition among
exchanges, including for the sale of proprietary market data. In 2011,
the DOJ stated that exchanges ``compete head to head to offer real-time
equity data products. These data products include the best bid and
offer of every exchange and information on each equity trade, including
the last sale.'' \14\
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\14\ ``Press Release, U.S. Department of Justice, Assistant
Attorney General Christine Varney Holds Conference Call Regarding
NASDAQ OMX Group Inc. and IntercontinentalExchange Inc. Abandoning
Their Bid for NYSE Euronext (May 16, 2011), available at https://www.justice.gov/iso/opa/atr/speeches/2011/at-speech-110516.html; see
also Complaint in U.S. v. Deutsche Borse AG and NYSE Euronext, Case
No. 11-cv-2280 (D.C. Dist.) ] 24 (``NYSE and Direct Edge compete
head-to-head . . . in the provision of real-time proprietary equity
data products.'').
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Moreover, competitive markets for listings, order flow, executions,
and transaction reports impose pricing discipline for the inputs of
proprietary data products and therefore constrain markets from
overpricing proprietary market data. Broker-dealers send their order
flow and transaction reports to multiple venues, rather than providing
them all to a single venue, which in turn reinforces this competitive
constraint. As a 2010 Commission Concept Release noted, the ``current
market structure can be described as dispersed and complex'' with
``trading volume . . . dispersed among many highly automated trading
centers that compete for order flow in the same stocks'' and ``trading
centers offer[ing] a wide range of services that are designed to
attract different types of market participants with varying trading
needs.'' \15\ More recently, former SEC Chair Mary Jo White reported
that competition for order flow in exchange-listed equities is
``intense'' and divided among many trading venues, including exchanges,
more than 40 alternative trading systems, and more than 250 broker-
dealers.\16\ And as the Commission's own Chief Administrative Law Judge
found after considering extensive fact and expert testimony and
documentary evidence on the subject, ``there is fierce competition for
trading services (or `order flow')'' among exchanges, and ``the record
evidence shows that competition plays a significant role in restraining
exchange pricing of depth-of-book products.'' In the Matter of the
Application of Securities Industry And Financial Markets Association
For Review of Actions Taken By Self-Regulatory Organizations, Initial
Decision Release No. 1015, Administrative Proceeding File No. 3-15350
(June 1, 2016), at pp. 8 and 33.
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\15\ Concept Release on Equity Market Structure, Securities
Exchange Act Release No. 61358 (Jan. 14, 2010), 75 FR 3594 (Jan. 21,
2010) (File No. S7-02-10). This Concept Release included data from
the third quarter of 2009 showing that no market center traded more
than 20% of the volume of listed stocks, further evidencing the
dispersal of and competition for trading activity. Id. at 3598. Data
available on ArcaVision show that from June 30, 2013 to June 30,
2014, no exchange traded more than 12% of the volume of listed
stocks by either trade or dollar volume, further evidencing the
continued dispersal of and fierce competition for trading activity.
See https://www.arcavision.com/Arcavision/arcalogin.jsp.
\16\ Mary Jo White, Enhancing Our Equity Market Structure,
Sandler O'Neill & Partners, L.P. Global Exchange and Brokerage
Conference (June 5, 2014) (available on the Commission website),
citing Tuttle, Laura, 2014, ``OTC Trading: Description of Non-ATS
OTC Trading in National Market System Stocks,'' at 7-8.
---------------------------------------------------------------------------
If an exchange succeeds in competing for quotations, order flow,
and trade executions, then it earns trading revenues and increases the
value of its proprietary market data products because they will contain
greater quote and trade information. Conversely, if an exchange is less
successful in attracting quotes, order flow, and trade executions, then
its market data products may be less desirable to customers in light of
the diminished content and data products offered by competing venues
may become more attractive. Thus, competition for quotations, order
flow, and trade executions puts significant pressure on an exchange to
maintain both execution and data fees at reasonable levels.
In addition, in the case of products that are also redistributed
through market data vendors, such as Bloomberg and Thompson Reuters,
the vendors themselves provide additional price discipline for
proprietary data products because they control the primary means of
access to certain end users. These vendors impose price discipline
based upon their business models. For example, vendors that assess a
surcharge on data they sell are able to refuse to offer proprietary
products that their end users do not or will not purchase in sufficient
numbers. Vendors will not elect to make NYSE BQT available unless their
customers request it, and customers will not elect to pay for NYSE BQT
unless the product can provide value by sufficiently increasing
revenues or reducing costs in the customer's business in a manner that
will offset the fees. All of these factors operate as constraints on
pricing proprietary data products.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \17\ of the Act and subparagraph (f)(2) of Rule
19b-4 \18\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\17\ 15 U.S.C. 78s(b)(3)(A).
\18\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------
At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \19\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
---------------------------------------------------------------------------
\19\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
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-NYSE-2018-24 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange
[[Page 26514]]
Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2018-24. 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 SR-NYSE-2018-24, and should be submitted on
or before June 28, 2018.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\20\
---------------------------------------------------------------------------
\20\ 17 CFR 200.30-3(a)(12).
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Eduardo A. Aleman,
Assistant Secretary.
[FR Doc. 2018-12194 Filed 6-6-18; 8:45 am]
BILLING CODE 8011-01-P
