Self-Regulatory Organizations; New York Stock Exchange LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change, as Modified by Partial Amendment No. 1, To Amend the Fees for NYSE BBO and NYSE Trades, 71505-71515 [2019-27871]
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Federal Register / Vol. 84, No. 248 / Friday, December 27, 2019 / Notices
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[FR Doc. 2019–27863 Filed 12–26–19; 8:45 am]
BILLING CODE 8011–01–P
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[Release No. 34–87803; File No. SR–NYSE–
2019–70]
Self-Regulatory Organizations; New
York Stock Exchange LLC; Notice of
Filing and Immediate Effectiveness of
Proposed Rule Change, as Modified by
Partial Amendment No. 1, To Amend
the Fees for NYSE BBO and NYSE
Trades
jbell on DSKJLSW7X2PROD with NOTICES
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’) 1 and Rule 19b–4 thereunder,2
notice is hereby given that, on December
4, 2019, New York Stock Exchange LLC
(‘‘NYSE’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
as described in Items I, II, and III below,
which Items have been prepared by the
Exchange. On December 17, 2019, the
Exchange filed Partial Amendment No.
1 to the proposed rule change.3 The
Commission is publishing this notice to
solicit comments on the proposed rule
change, as modified by Partial
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 In Partial Amendment No. 1, the Exchange
provided an additional example in support of the
proposed rule change.
2 17
18:44 Dec 26, 2019
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to (1) amend
the fees for NYSE BBO and NYSE
Trades by modifying the application of
the Access Fee; (2) amend the fees for
NYSE Trades by adopting a credit
applicable to the Redistribution Fee;
and (3) adopt a one-month free trial for
all NYSE market data products. The
Exchange also proposes to remove
certain obsolete text. The Exchange
proposes to implement the proposed fee
changes on February 3, 2020. 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.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
December 19, 2019.
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Amendment No. 1, from interested
persons.
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The Exchange proposes to decrease
the fees for certain NYSE market data
products, as set forth on the NYSE
Proprietary Market Data Fee Schedule
(‘‘Fee Schedule’’). These fee decreases,
taken together with fee decreases filed
by the Exchange’s affiliated exchanges,
NYSE Arca, Inc. (‘‘NYSE Arca’’) and
NYSE American LLC (‘‘NYSE
American’’),4 will reduce the fees
associated with the NYSE BQT
proprietary data product, which
competes directly with similar products
offered by both the Nasdaq and Cboe
families of U.S. equity exchanges.
Collectively, the proposed fee decreases
are intended to respond to the
competition posed by similar products
offered by the other exchange groups.
4 See SR–NYSEArca–2019–88 and SR–
NYSEAmer–2019–55.
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Specifically, the Exchange proposes to
(1) reduce the Access Fees by more than
93% for subscribers of NYSE BBO and
NYSE Trades that receive a data feed
and use those market data products in
a display-only format; (2) provide for a
credit applicable to the Redistribution
Fee for subscribers of NYSE Trades that
use that market data product for display
purposes; and (3) adopt a one-month
free trial for all NYSE market data
products. The Exchange also proposes
non-substantive changes to remove
certain obsolete text from the Fee
Schedule. All of the proposed changes
would decrease fees for market data on
the Exchange.
The Exchange proposes to implement
these proposed fee changes on February
3, 2020.
Background
The Commission has repeatedly
expressed its preference for competition
over regulatory intervention in
determining prices, products, and
services in the securities markets. In
Regulation NMS, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues, and also recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 5
As the Commission itself recognized,
the market for trading services in NMS
stocks has become ‘‘more fragmented
and competitive.’’ 6 Indeed, equity
trading is currently dispersed across 13
exchanges,7 31 alternative trading
systems,8 and numerous broker-dealer
internalizers and wholesalers, all
competing for order flow. Based on
publicly-available information, no
single exchange currently has more than
18% market share (whether including or
excluding auction volume).9
With the NYSE BQT market data
product, NYSE and its affiliates compete
5 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37495, 37499 (June 29, 2005)
(S7–10–04) (Final Rule) (‘‘Regulation NMS
Adopting Release’’).
6 See Securities Exchange Act Release No. 51808,
84 FR 5202, 5253 (February 20, 2019) (File No. S7–
05–18) (Transaction Fee Pilot for NMS Stocks Final
Rule) (‘‘Transaction Fee Pilot’’).
7 See Cboe Global Markets, U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/. See
generally https://www.sec.gov/fast-answers/
divisionsmarketregmrexchangesshtml.html.
8 See FINRA ATS Transparency Data, available at
https://otctransparency.finra.org/otctransparency/
AtsIssueData. A list of alternative trading systems
registered with the Commission is available at
https://www.sec.gov/foia/docs/atslist.htm.
9 See Cboe Global Markets U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/.
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head to head with the Nasdaq Basic 10
and Cboe One Feed 11 market data
products. Similar to those market data
products, NYSE BQT, which was
established in 2014,12 consists of certain
elements from the NYSE BBO and NYSE
Trades market data products as well as
from market data products from the
Exchange’s affiliates, NYSE Arca, NYSE
American, NYSE National, Inc. (‘‘NYSE
National’’),13 and NYSE Chicago, Inc.
(‘‘NYSE Chicago’’).14 Similar to both
Nasdaq Basic and the Cboe One Feed,
NYSE BQT provides investors with a
unified view of comprehensive last sale
and BBO data in all Tape A, B, and C
securities that trade on the Exchange,
NYSE Arca, NYSE American, NYSE
National, and NYSE Chicago. Also
similar to Nasdaq Basic and the Cboe
One Feed, NYSE BQT is not intended to
be used for purposes of making orderrouting or trading decisions, but rather
provides indicative prices for Tape A, B,
and C securities.15
The Exchange currently charges an
access fee of $250 per month for NYSE
BQT, and, as provided for in footnote 5
to the Fee Schedule, to subscribe to
NYSE BQT, subscribers must also
subscribe to, and pay applicable fees for
NYSE BBO, NYSE Trades, NYSE Arca
BBO, NYSE Arca Trades, NYSE
American BBO, NYSE American Trades,
NYSE National BBO, NYSE National
Trades, NYSE Chicago BBO, and NYSE
Chicago Trades. Thus, the charges for
NYSE BQT are the $250 access fee for
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10 As
described on the Nasdaq website, available
here: https://www.nasdaqtrader.com/Trader.aspx?
id=nasdaqbasic, Nasdaq Basic is a ‘‘low cost
alternative’’ that provides ‘‘Best Bid and Offer and
Last Sale information for all U.S. exchange-listed
securities based on liquidity within the Nasdaq
market center, as well as trades reported to the
FINRA Trade Reporting Facility (‘‘TRF’’).’’
11 As described on the Cboe website, available
here: https://markets.cboe.com/us/equities/market_
data_services/cboe_one/, the Cboe One Feed is a
‘‘market data product that provides cost-effective,
high-quality reference quotes and trade data for
market participants looking for comprehensive,
real-time market data’’ and provides a ‘‘unified
view of the market from all four Cboe equity
exchanges: BZX Exchange, BYX Exchange, EDGX
Exchange, and EDGY [sic] Exchange.’’
12 See Securities Exchange Act Release Nos.
72750 (August 4, 2014), 79 FR 46494 (August 8,
2014) (notice—NYSE BQT); and 73553 (November
6, 2014), 79 FR 67491 (November 13, 2014)
(approval order—NYSE BQT) (SR–NYSE–2014–40)
(‘‘NYSE BQT Filing’’).
13 In 2018, NYSE BQT was amended to include
NYSE National BBO and NYSE National Trades.
See Securities Exchange Act Release No. 83359
(June 1, 2018), 83 FR 26507 (June 7, 2018) (SR–
NYSE–2018–22).
14 In 2019, NYSE BQT was amended to include
NYSE Chicago BBO and NYSE Chicago Trades. See
Securities Exchange Act Release No. 87511
(November 12, 2019), 84 FR 63689 (November 18,
2019) (SR–NYSE–2019–60).
15 See NYSE BQT Filing, supra note 12.
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18:44 Dec 26, 2019
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NYSE BQT,16 plus a $1,500 access fee
for each of NYSE BBO and NYSE
Trades, plus a $750 access fee for each
of NYSE Arca BBO and NYSE Arca
trades,17 plus a $750 access fee for each
of NYSE American BBO and NYSE
American Trades,18 for a total of $6,250
($250 + $3,000 + $1,500 + $1,500).19 In
addition, an NYSE BQT subscriber
would need to pay for the applicable
Professional or Non-Professional User
Fees for the underlying market data
products, as applicable.20
To reduce administrative burdens on
subscribers of NYSE BQT, the Exchange
does not currently require NYSE BQT
subscribers to complete separate
paperwork for each of the underlying
market data products. Rather, NYSE
BQT subscribers need only subscribe to
NYSE BQT, and then NYSE charges
such subscribers for the underlying
market data feeds as part of the fees for
NYSE BQT. To promote transparency of
how data recipients would subscribe to
NYSE BQT, the Exchange proposes to
amend footnote 5 to the Fee Schedule to
provide that ‘‘[t]o subscribe to NYSE
BQT, subscribers must also [sic] pay
applicable fees for’’ the underlying
market data products, and would delete
the text that requires NYSE BQT
subscribers to separately subscribe to
the underlying market data products.
This proposed amendment does not
change the fees for NYSE BQT.
Because NYSE BQT is priced based
on the fees associated with the
16 The Exchange is not proposing any change to
the $250 access fee for NYSE BQT.
17 See NYSE Arca Equities Proprietary Market
Data Fees (‘‘NYSE Arca Price List’’), available here:
https://www.nyse.com/publicdocs/nyse/data/
NYSE_Arca_Equities_Fee_Schedule.pdf.
18 See NYSE American Equities Proprietary
Market Data Fees (‘‘NYSE American Price List’’),
available here: https://www.nyse.com/publicdocs/
nyse/data/NYSE_Arca_Equities_Fee_Schedule.pdf.
19 There are currently no fees charged for the
NYSE National BBO, NYSE National Trades, NYSE
Chicago BBO, or NYSE Chicago Trades market data
products.
20 The Exchange is not proposing any changes to
the User Fees. Currently, the Professional User Fees
for each of NYSE BBO and NYSE Trades is $4 per
month, and the Non-Professional User Fees for each
of NYSE BBO and NYSE Trades is $0.20 per month.
See Fees Schedule, available here: https://
www.nyse.com/publicdocs/nyse/data/NYSE_
Market_Data_Fee_Schedule.pdf. The Professional
User Fees for each of NYSE Arca BBO and NYSE
Arca Trades is $4 per month, and the NonProfessional User Fees for each of NYSE Arca BBO
and NYSE Arca Trades is $0.25 per month. See
NYSE Arca Price List, available here: https://
www.nyse.com/publicdocs/nyse/data/NYSE_Arca_
Equities_Fee_Schedule.pdf. The Professional User
Fees for each of NYSE American BBO and NYSE
American Trades is $4 per month, and the NonProfessional User Fees for each of NYSE American
BBO and NYSE American Trades is $0.25 per
month. See NYSE American Price List, available
here: https://www.nyse.com/publicdocs/nyse/data/
NYSE_Arca_Equities_Fee_Schedule.pdf.
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underlying ten market data feeds, the
Exchange and its affiliates propose to
compete with the Cboe One Feed and
Nasdaq Basic by reducing fees for the
underlying market data products that
comprise NYSE BQT. Together with
NYSE Arca and NYSE American, the
Exchange similarly proposes to compete
for subscribers to NYSE BQT by
designing its fee decreases to be
attractive to subscribers of NYSE BBO
and NYSE Trades that use such
products for display-only purposes,
which are more likely to be subscribers
that service retail investors.
Access Fee—NYSE BBO and NYSE
Trades
NYSE BBO is a NYSE-only market
data product that allows a vendor to
redistribute on a real-time basis the
same best-bid-and-offer information that
NYSE reports under the Consolidated
Quotation Plan (‘‘CQ Plan’’) for
inclusion in the CQ Plan’s consolidated
quotation information data stream
(‘‘NYSE BBO Information’’).21 NYSE
BBO Information includes the best bids
and offers for all securities that are
traded on the Exchange and for which
NYSE reports quotes under the CQ Plan.
NYSE BBO is available over a single
data feed, regardless of the markets on
which the securities are listed. NYSE
BBO is made available to its subscribers
no earlier than the information it
contains is made available to the
processor under the CQ Plan.
NYSE Trades is a NYSE-only market
data product that allows a vendor to
redistribute on a real-time basis the
same last sale information that NYSE
reports to the Consolidated Tape
Association (‘‘CTA’’) for inclusion in the
CTA’s consolidated data stream and
certain other related data elements
(‘‘NYSE Last Sale Information’’).22
NYSE Last Sale Information includes
last sale information for all securities
that are traded on the Exchange. NYSE
Trades is made available to subscribers
at the same time as the information it
contains is made available to the
processor under the CTA Plan.
Currently, subscribers of each of the
NYSE BBO and NYSE Trades products
that receive a data feed pay an Access
Fee of $1,500 per month. The Exchange
21 See Securities Exchange Act Release Nos.
61914 (April 14, 2010), 75 FR 21077 (April 22,
2010) (SR–NYSE–2010–30) (notice—NYSE BBO);
and 62181 (May 26, 2010), 75 FR 31488 (June 3,
2010) (SR–NYSE–2010–30) (approval order—NYSE
BBO).
22 See Securities Exchange Act Release Nos.
59309 (January 28, 2009), 74 FR 6073 (February 4,
2009) (SR–NYSE–2009–04) (notice—NYSE Trades);
and 59309 (March 19, 2009), 74 FR 13293 (March
26, 2009) (SR–NYSE–2009–04) (approval order—
NYSE Trades).
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proposes to reduce the Access Fees for
subscribers of NYSE BBO and NYSE
Trades that receive a data feed and use
those products in a display-only format,
including for internal use for
Professional Users and external
distribution to both Professional and
Non-Professional Users in a displayonly format, from $1,500 per month (per
product) to $100 per month (per
product). The Exchange proposes to
designate this access fee as a ‘‘Per User
Access Fee.’’ A subscriber that receives
a data feed and uses the market data
product for any other purpose (such as
a non-display use), including if
combined with Per User use, would
continue to pay the $1,500 per month
Access Fee.23 A subscriber will be
charged only one access fee for each of
the NYSE BBO and NYSE Trades
products, depending on the use of that
product.
The proposed rule change would
result in lower fees for subscribers of
each of the NYSE BBO and NYSE
Trades products that receive a data feed
and use such products for display-only
purposes. The proposed Per User Access
Fee of $100 per month, lowered from
$1,500 per month, would result in a
reduction of more than 93% for
subscribers that receive a data feed and
use the product in a display-only
format. Additionally, the proposed rule
change, together with the corresponding
proposed rule changes by NYSE Arca
and NYSE American to similarly reduce
the access fees to their BBO and Trades
products, would also significantly lower
access fees for display-only subscribers
of NYSE BQT, from $6,250 per month
to $850 per month ($250 + $200 + $200
+ $200), a reduction of more than 86%.
The proposed rule change is intended
to encourage greater use of NYSE BQT
by making it more affordable for data
recipients that receive a data feed of
NYSE Trades and NYSE BBO and use
the products in a display-only format
and thereby, allow the Exchange to
compete more effectively with Cboe One
Feed and Nasdaq Basic. The Exchange
believes the proposed rule change
would allow the Exchange to offer retail
investors a competitively priced
alternative to other top-of-book data
products available in the marketplace.
Redistribution Fee—NYSE Trades
The Exchange currently charges a
Redistribution Fee of $1,000 per month
for NYSE Trades. A Redistributor is a
vendor or any other person that
provides a NYSE data product to a data
23 With the proposed adoption of the Per User
Access Fee, the Exchange proposes to rename the
Access Fee as the General Access Fee.
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recipient or to any system that a data
recipient uses, irrespective of the means
of transmission or access. A
Redistributor is required to report to the
Exchange each month the number of
Professional and Non-Professional Users
and data feed recipients that receive
NYSE Trades. As noted above, for
display use of NYSE Trades, the
Exchange currently charges a Per User
Fee of $4 per month for each
Professional User and a Per User Fee of
$0.20 per month for each NonProfessional User. These user fees apply
to each display device that has access to
NYSE Trades.
The Exchange proposes to adopt a
credit that would be applicable to
Redistributors that provide external
distribution of NYSE Trades to
Professional and Non-Professional Users
in a display-only format. As proposed,
such Redistributors would receive a
credit equal to the amount of the
monthly Professional User and NonProfessional User Fees for such external
distribution, up to a maximum of the
Redistribution Fee for NYSE Trades. For
example, a Redistributor that reports
external Professional Users and NonProfessional Users in a month totaling
$1,000 or more would receive a
maximum credit of $1,000 for that
month, which could effectively reduce
its Redistribution Fee to zero. If that
same Redistributor were to report
external User quantities in a month
totaling $500 of monthly usage, that
Redistributor would receive a credit of
$500. Redistributors would have an
incentive to increase their redistribution
of NYSE Trades because the credit they
would be eligible to receive would
increase if they report additional
external User quantities.
By targeting this proposed credit to
Redistributors that provide external
distribution of NYSE Trades in a
display-only product, the Exchange
believes that this proposed fee decrease
would provide an incentive for
Redistributors to make the NYSE BQT
market data product available to its
customers. Specifically, if a data
recipient is interested in subscribing to
NYSE BQT and relies on a Redistributor
to obtain market data products from the
Exchange, that data recipient would
need its Redistributor to redistribute
NYSE BQT. Currently, Redistributors
that redistribute NYSE market data
products do not necessarily also make
NYSE BQT available. Because data
recipients that use NYSE BQT do so for
display-only use, and therefore would
use the NYSE Trades market data
product for display-only use, the
Exchange believes that this proposed fee
decrease for Redistributors of NYSE
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71507
Trades would provide an incentive for
Redistributors to make NYSE BQT
available to its customers, which will
increase the availability of NYSE BQT to
a larger potential population of data
recipients.24
One-Month Free Trial—All NYSE
Market Data Products
The Exchange proposes a one-month
free trial for any firm that subscribes to
a particular NYSE market data product
for the first time. As proposed, a firsttime subscriber would be any firm that
has not previously subscribed to a
particular NYSE market data product
listed on the Fee Schedule. As
proposed, a first-time subscriber of a
particular NYSE market data product
would not be charged the Access Fee,
Non-Display Fee, any applicable
Professional and Non-Professional User
Fee, and Redistribution Fee for that
product for one calendar month. For
example, a firm that currently
subscribes to NYSE BBO would be
eligible to receive a free one-month trial
of NYSE Trades, whether in a displayonly format or for non-display use. On
the other hand, a firm that currently
pays an Access Fee and receives NYSE
BBO for non-display use would not be
eligible to receive a free one-month trial
of NYSE BBO in a display-only format.
The proposed free trial would be for the
first full calendar month following the
date a subscriber is approved to receive
trial access to the particular NYSE
market data product. The Exchange
would provide the one-month free trial
for each particular product to each
subscriber once.
The Exchange believes that providing
a one-month free trial to NYSE market
data products listed on the Fee
Schedule would enable potential
subscribers to determine whether a
particular NYSE market data product
provides value to their business models
before fully committing to expend
development and implementation costs
related to the receipt of that product,
and is intended to encourage increased
use of the Exchange’s market data
products by defraying some of the
development and implementation costs
subscribers would ordinarily have to
expend before using a product.
Non-Substantive Changes
In March 2016, the Exchange
amended the Fee Schedule to adopt
footnote 3 regarding a Decommission
Extension Fee for receipt of the NYSE
BBO and NYSE Trades market data
24 NYSE does not charge a Redistribution Fee for
NYSE BBO.
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products.25 And in October 2016, the
Exchange amended the Fee Schedule to
adopt footnote 7 regarding a
Decommission Extension Fee for receipt
of the NYSE Order Imbalances market
data product.26 The Decommission
Extension Fee for NYSE BBO, NYSE
Trades, and NYSE Order Imbalances
was adopted to allow existing
subscribers at the time to receive these
market data products in their legacy
format, as the Exchange was then
transitioning to a newer distribution
protocol. The Decommission Extension
Fee for NYSE BBO and NYSE Trades
expired on September 1, 2016, and the
Decommission Extension Fee for NYSE
Order Imbalances expired on April 28,
2017. The Exchange proposes to remove
rule text regarding the Decommission
Extension Fee for NYSE BBO and NYSE
Trades from footnote 3 of the Fee
Schedule, and for NYSE Order
Imbalances from footnote 7 of the Fee
Schedule, as that rule text is now
obsolete because the period of time
during which the Decommission
Extension Fee for NYSE BBO and NYSE
Trades and for NYSE Order Imbalances
was applicable has passed. The
Exchange proposes to mark footnote 3 as
‘‘Reserved,’’ and replace the text in
footnote 7 with rule text regarding the
proposed fee change related to the
Redistribution Fee for NYSE Trades
described above.
The Exchange also proposes a nonsubstantive amendment to move the text
describing the Enterprise Fee on the Fee
Schedule to appear below the NonProfessional User Fee. The Exchange is
not making any substantive changes to
this fee. The Exchange believes that this
proposed non-substantive change will
make the Fee Schedule easier to
navigate, as the Enterprise Fee is related
to Per User fees.
The Exchange also proposes a nonsubstantive, clarifying amendment to
footnote 4 to delete the term ‘‘clients’’
and replace it with the term
‘‘Professional Users and NonProfessional Users.’’ This proposed
change is consistent with the operation
of the Enterprise Fee, which relates only
to the Professional User and NonProfessional Per User Fees. The
Exchange believes that this proposed
change would promote clarity and
transparency of the Fee Schedule,
without making any substantive
changes.
25 See Securities Exchange Act Release No. 77388
(March 17, 2016), 81 FR 15363 (March 22, 2016)
(SR–NYSE–2016–21).
26 See Securities Exchange Act Release No. 79286
(November 10, 2016), 81 FR 81186 (November 17,
2016) (SR–NYSE–2016–73).
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Applicability of Proposed Rule Change
As noted above, the proposed rule
change is designed to reduce the overall
cost of NYSE BQT by reducing specified
fees applicable to the underlying market
data products that comprise NYSE BQT.
The Exchange currently has only one
subscriber to NYSE BQT (a vendor), and
believes that the proposed rule change
would provide an incentive both for
data subscribers to subscribe to NYSE
BQT and for Redistributors to subscribe
to the product for purposes of providing
external distribution of NYSE BQT.
Because the proposed rule change is
targeted to potential customers of NYSE
BQT, which is designed to be a product
for display-only data subscribers, the
proposed changes to the NYSE BBO and
NYSE Trades Access Fees, together with
the proposed changes on NYSE Arca
and NYSE American, are narrowly
construed with that purpose in mind.
Accordingly, these proposed fee
changes are not designed for data
subscribers that use NYSE BBO or NYSE
Trades for non-display use, or for
Redistributors that redistribute NYSE
Trades to data subscribers that use that
market data product for non-display
uses. This proposed rule change would
not result in any changes to the market
data fees for NYSE BBO and NYSE
Trades for such data subscribers.
The Exchange believes that two
current subscribers to the NYSE BBO
and NYSE Trades market data products
would meet the qualifications to be
eligible for these proposed fee changes.
The Exchange further believes that this
proposed rule change has the potential
to attract new Redistributors for NYSE
BQT, as well as new NYSE BQT
subscribers that would be subscribing to
NYSE BBO and NYSE Trades for the
first time.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,27
in general, and Sections 6(b)(4) and
6(b)(5) of the Act,28 in particular, in that
it provides an equitable allocation of
reasonable fees among users and
recipients of the data and is not
designed to permit unfair
discrimination among customers,
issuers, and brokers.
The Proposed Rule Change Is
Reasonable
In adopting Regulation NMS, the
Commission granted SROs and brokerdealers increased authority and
flexibility to offer new and unique
27 15
28 15
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market data to the public. The
Commission has repeatedly expressed
its preference for competition over
regulatory intervention in determining
prices, products, and services in the
securities markets. Specifically, in
Regulation NMS, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues, and also recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 29
With respect to market data, the
decision of the United States Court of
Appeals for the District of Columbia
Circuit in NetCoalition v. SEC upheld
the Commission’s reliance on the
existence of competitive market
mechanisms to evaluate the
reasonableness and fairness of fees for
proprietary market data:
In fact, the legislative history indicates that
the Congress intended that the market system
‘‘evolve through the interplay of competitive
forces as unnecessary regulatory restrictions
are removed’’ and that the SEC wield its
regulatory power ‘‘in those situations where
competition may not be sufficient,’’ such as
in the creation of a ‘‘consolidated
transactional reporting system.’’ 30
The court agreed with the
Commission’s conclusion that
‘‘Congress intended that ‘competitive
forces should dictate the services and
practices that constitute the U.S.
national market system for trading
equity securities.’ ’’ 31
1. The Proposed Fees Are Constrained
by Significant Competitive Forces
a. Exchange Market Data Is Sold in a
Competitive Market
In 2018, Charles M. Jones, the Robert
W. Lear of Professor of Finance and
Economics of the Columbia University
School of Business, conducted an
analysis of the market for equity market
data in the United States. He canvassed
the demand for both consolidated and
exchange proprietary market data
products and the uses to which those
products were put by market
participants, and reported his
conclusions in a paper annexed
hereto.32 Among other things, Professor
Jones concluded that:
29 See Regulation NMS Adopting Release, 70 FR
37495, at 37499.
30 NetCoalition v. SEC, 615 F.3d 525, 535 (D.C.
Cir. 2010) (‘‘NetCoalition I’’) (quoting H.R. Rep. No.
94–229 at 92 (1975), as reprinted in 1975
U.S.C.C.A.N. 323).
31 Id. at 535.
32 See Exhibit 3A, Charles M. Jones,
Understanding the Market for U.S. Equity Market
Data, August 31, 2018 (hereinafter ‘‘Jones Paper’’).
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• ‘‘The market [for exchange market
data] is characterized by robust
competition: exchanges compete with
each other in selling proprietary market
data products. They also compete with
consolidated data feeds and with data
provided by alternative trading systems
(‘ATSs’). Barriers to entry are very low,
so existing exchanges must also take
into account competition from new
entrants, who generally try to build
market share by offering their
proprietary market data products for
free for some period of time.’’ 33
• ‘‘Although there are regulatory
requirements for some market
participants to use consolidated data
products, there is no requirement for
market participants to purchase any
proprietary market data product for
regulatory purposes.’’ 34
• ‘‘There are a variety of data
products, and consumers of equity
market data choose among them based
on their needs. Like most producers,
exchanges offer a variety of market data
products at different price levels.
Advanced proprietary market data
products provide greater value to those
who subscribe. As in any other market,
each potential subscriber takes the
features and prices of available products
into account in choosing what market
data products to buy based on its
business model.’’ 35
• ‘‘Exchange equity market data fees
are a small cost for the industry overall:
the data demonstrates that total
exchange market data revenues are
orders of magnitude smaller than (i)
broker-dealer commissions, (ii)
investment bank earnings from equity
trading, and (iii) revenues earned by
third-party vendors.’’ 36
• ‘‘For proprietary exchange data
feeds, the main question is whether
there is a competitive market for
proprietary market data. More than 40
active exchanges and alternative trading
systems compete vigorously in both the
market for order flow and in the market
for market data. The two are closely
linked: an exchange needs to consider
the negative impact on its order flow if
it raises the price of its market data.
Furthermore, new entrants have been
frequent over the past 10 years or so,
and these venues often give market data
away for free, serving as a check on
pricing by more established exchanges.
These are all the standard hallmarks of
a competitive market.’’ 37
33 Jones
Paper at 2.
Professor Jones’ conclusions are
consistent with the demonstration of the
competitive constraints on the pricing of
market data demonstrated by analysis of
exchanges as platforms for market data
and trading services, as shown below.
b. Exchanges That Offer Market Data
and Trading Services Function as TwoSided Platforms
An exchange may demonstrate that its
fees are constrained by competitive
forces by showing that the platform
theory of competition applies.
As the United States Supreme Court
recognized in Ohio v. American
Express, platforms are firms that act as
intermediaries between two or more sets
of agents, and typically the choices
made on one side of the platform affect
the results on the other side of the
platform via externalities, or ‘‘indirect
network effects.’’ 38 Externalities are
linkages between the different ‘‘sides’’
of a platform such that one cannot
understand pricing and competition for
goods or services on one side of the
platform in isolation; one must also
account for the influence of the other
side. As the Supreme Court explained:
To ensure sufficient participation, twosided platforms must be sensitive to the
prices that they charge each side. . . .
Raising the price on side A risks losing
participation on that side, which decreases
the value of the platform to side B. If the
participants on side B leave due to this loss
in value, then the platform has even less
value to side A—risking a feedback loop of
declining demand. . . . Two-sided platforms
therefore must take these indirect network
effects into account before making a change
in price on either side.39
The Exchange and its affiliated
exchanges have long maintained that
they function as platforms between
consumers of market data and
consumers of trading services. Proving
the existence of linkages between the
two sides of this platform requires an indepth economic analysis of both public
data and confidential Exchange data
about particular customers’ trading
activities and market data purchases.
Exchanges, however, are prohibited
from sharing details about these specific
customer activities and purchases. For
example, pursuant to Exchange Rule
7.41, transactions executed on the
Exchange are processed anonymously.
The Exchange and its affiliated
exchanges have retained a third party
expert, Marc Rysman, Professor of
Economics Boston University, to
analyze how platform economics
applies to stock exchanges’ sale of
34 Id.
35 Id.
38 Ohio v. American Express, 138 S. Ct. 2274,
2280–81 (2018).
39 Id. at 2281.
36 Id.
37 Id.
at 39–40.
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market data products and trading
services, and to explain how this affects
the assessment of competitive forces
affecting the exchanges’ data fees.40
Professor Rysman was able to analyze
exchange data that is not otherwise
publicly available in a manner that is
consistent with the exchanges’
confidentiality obligations to customers.
As shown in his paper, Professor
Rysman surveyed the existing economic
literature analyzing stock exchanges as
platforms between market data and
trading activities, and explained the
types of linkages between market data
access and trading activities that must
be present for an exchange to function
as a platform. In addition, Professor
Rysman undertook an empirical
analysis of customers’ trading activities
within the NYSE group of exchanges in
reaction to NYSE’s introduction in 2015
of the NYSE Integrated Feed, a full
order-by-order depth of book data
product.41
Professor Rysman’s analysis of this
confidential firm-level data shows that
firms that purchased the NYSE
Integrated Feed market data product
after its introduction were more likely to
route orders to NYSE as opposed to one
of the other NYSE-affiliated exchanges,
such as NYSE Arca or NYSE
American.42 Moreover, Professor
Rysman shows that the same is true for
firms that did not subscribe to the NYSE
Integrated Feed: The introduction of the
NYSE Integrated Feed led to more
trading on NYSE (as opposed to other
NYSE-affiliated exchanges) by firms that
did not subscribe to the NYSE
Integrated Feed.43 This is the sort of
externality that is a key characteristic of
a platform market.44
From this empirical evidence,
Professor Rysman concludes:
• ‘‘[D]ata is more valuable when it
reflects more trading activity and more
liquidity-providing orders. These
linkages alone are enough to make
platform economics necessary for
understanding the pricing of market
data.’’ 45
40 See Exhibit 3B, Marc Rysman, Stock Exchanges
as Platforms for Data and Trading, December 2,
2019 (hereinafter ‘‘Rysman Paper’’), ¶ 7.
41 See Securities Exchange Act Release Nos.
74128 (January 23, 2015), 80 FR 4951 (January 29,
2015) (SR–NYSE–2015–03) (Notice of filing and
immediate effectiveness of proposed rule change to
establish NYSE Integrated Feed) and 76485
(November 20, 2015), 80 FR 74158 (November 27,
2015) (SR–NYSE–2015–57) (Notice of filing and
immediate effectiveness of proposed rule change to
establish fees for the NYSE Integrated Feed).
42 Rysman Paper ¶¶ 79–89.
43 Id. ¶¶ 90–91.
44 Id. ¶ 90.
45 Id. ¶ 95.
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• ‘‘[L]inkages running in the opposite
direction, from data to trading, are also
very likely to exist. This is because
market data from an exchange reduces
uncertainty about the likelihood, price,
or timing of execution for an order on
that exchange. This reduction in
uncertainty makes trading on that
exchange more attractive for traders that
subscribe to that exchange’s market
data. Increased trading by data
subscribers, in turn, makes trading on
the exchange in question more attractive
for traders that do not subscribe to the
exchange’s market data.’’ 46
• The ‘‘mechanisms by which market
data makes trading on an exchange more
attractive for subscribers to market data
. . . apply to a wide assortment of
market data products, including BBO,
order book, and full order-by-order
depth of book data products at all
exchanges.’’ 47
• ‘‘[E]mpirical evidence confirms that
stock exchanges are platforms for data
and trading.’’ 48
• ‘‘The platform nature of stock
exchanges means that data fees cannot
be analyzed in isolation, without
accounting for the competitive
dynamics in trading services.’’ 49
• ‘‘Competition is properly
understood as being between platforms
(i.e., stock exchanges) that balance the
needs of consumers of data and
traders.’’ 50
• ‘‘Data fees, data use, trading fees,
and order flow are all interrelated.’’ 51
• ‘‘Competition for order flow can
discipline the pricing of market data,
and vice-versa.’’ 52
• ‘‘As with platforms generally,
overall competition between exchanges
will limit their overall profitability, not
margins on any particular side of the
platform.’’ 53
c. Exchange Market Data Fees Are
Constrained by the Availability of
Substitute Platforms
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Professor Rysman’s conclusions that
exchanges function as platforms for
market data and transaction services
mean that exchanges do not set fees for
market data products without
considering, and being constrained by,
the effect the fees will have on the
order-flow side of the platform. And as
the D.C. Circuit recognized in
NetCoalition I, ‘‘[n]o one disputes that
46 Id.
¶ 96.
47 Id.
48 Id.
49 Id.
¶ 97.
¶ 98.
50 Id.
51 Id.
52 Id.
53 Id.
¶ 100.
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competition for order flow is fierce.’’ 54
The court further noted that ‘‘no
exchange possesses a monopoly,
regulatory or otherwise, in the execution
of order flow from broker dealers,’’ and
that an exchange ‘‘must compete
vigorously for order flow to maintain its
share of trading volume.’’ 55
Similarly, the Commission itself has
recognized that the market for trading
services in NMS stocks has become
‘‘more fragmented and competitive.’’ 56
The Commission’s Division of Trading
and Markets has also recognized that
with so many ‘‘operating equities
exchanges and dozens of ATSs, there is
vigorous price competition among the
U.S. equity markets and, as a result,
[transaction] fees are tailored and
frequently modified to attract particular
types of order flow, some of which is
highly fluid and price sensitive.’’ 57
Indeed, today, equity trading is
currently dispersed across 13
exchanges,58 31 alternative trading
systems,59 and numerous broker-dealer
internalizers and wholesalers, all
competing for order flow. Based on
publicly-available information, no
single exchange currently has more than
18% market share.60
Further, low barriers to entry mean
that new exchanges may rapidly and
inexpensively enter the market and offer
additional substitute platforms to
compete with the Exchange.61 In
addition to the 13 presently-existing
exchanges, three new ones are expected
to enter the market in 2020: Long Term
Stock Exchange (LTSE), which has been
approved as an equities exchange but is
not yet operational; 62 Members
54 NetCoalition I, 615 F.3d at 544 (internal
quotation omitted).
55 Id.
56 See Securities Exchange Act Release No. 51808,
84 FR 5202, 5253 (February 20, 2019) (File No. S7–
05–18).
57 Commission Division of Trading and Markets,
Memorandum to EMSAC, dated October 20, 2015,
available here: https://www.sec.gov/spotlight/
emsac/memo-maker-taker-fees-on-equitiesexchanges.pdf.
58 See Cboe Global Markets, U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/. See
generally https://www.sec.gov/fast-answers/
divisionsmarketregmrexchangesshtml.html.
59 See FINRA ATS Transparency Data, available
at https://otctransparency.finra.org/
otctransparency/AtsIssueData. A list of alternative
trading systems registered with the Commission is
available at https://www.sec.gov/foia/docs/
atslist.htm.
60 See Cboe Global Markets U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/.
61 See Jones Paper at 10–11.
62 See Securities Exchange Act Release No. 85828
(May 10, 2019) (File No. 10–234) (Findings,
Opinion, and Order of the Commission in the
Matter of the Application of Long Term Stock
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Exchange (MEMX), which has recently
filed its application to be approved as a
registered equities exchange; 63 and
Miami International Holdings (MIAX),
which has announced its plan to
introduce equities trading on an existing
registered options exchange.64
Given Professor Rysman’s conclusion
that exchanges are platforms for market
data and trading, this fierce competition
for order flow on the trading side of the
platform acts to constrain, or
‘‘discipline,’’ the pricing of market data
on the other side of the platform.65 And
due to the ready availability of
substitutes and the low cost to move
order flow to those substitute trading
venues, an exchange setting market data
fees that are not at competitive levels
would expect to quickly lose business to
alternative platforms with more
attractive pricing.66 Although the
various exchanges may differ in their
strategies for pricing their market data
products and their transaction fees for
trades—with some offering market data
for free along with higher trading costs,
and others charging more for market
data and comparatively less for
trading—the fact that exchanges are
platforms ensures that no exchange
makes pricing decisions for one side of
its platform without considering, and
being constrained by, the effects that
price will have on the other side of the
platform.
In sum, the fierce competition for
order flow thus constrains any exchange
from pricing its market data at a
supracompetitive price, and constrains
the Exchange in setting its fees at issue
here.
The proposed fees are therefore
reasonable because in setting them, the
Exchange is constrained by the
availability of numerous substitute
platforms offering market data products
and trading. Such substitutes need not
be identical, but only substantially
similar to the product at hand.
More specifically, in reducing
specified fees for the NYSE BBO and
NYSE Trades market data products, the
Exchange is constrained by the fact that,
if its pricing across the platform is
unattractive to customers, customers
Exchange, Inc. for Registration as a National
Securities Exchange).
63 See Securities Exchange Act Release No. 87436
(October 31, 2019) (File No. 10–237) (Notice of
filing of application of MEMX LLC for registration
as a national securities exchange under Section 6
of the Act).
64 See Press Release of Miami International
Holdings Inc., dated May 17, 2019, available here:
https://www.miaxoptions.com/sites/default/files/
press_release-files/MIAX_Press_Release_
05172019.pdf.
65 Rysman Paper ¶ 98.
66 See Jones Paper at 11.
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have their pick of an increasing number
of alternative platforms to use instead of
the Exchange. The Exchange believes
that it has considered all relevant factors
and has not considered irrelevant
factors in order to establish reasonable
fees. The existence of numerous
alternative platforms to the Exchange’s
platform ensures that the Exchange
cannot set unreasonable market data
fees without suffering the negative
effects of that decision in the fiercely
competitive market for trading order
flow.
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d. The Availability of Substitute Market
Data Products Constrains Fees for NYSE
BBO, NYSE Trades, and NYSE BQT
Even putting aside the facts that
exchanges are platforms and that pricing
decisions on the two sides of the
platform are intertwined, the Exchange
is constrained in setting the proposed
market data fees by the availability of
numerous substitute market data
products.
The Exchange’s NYSE BQT market
data product is subject to significant
competitive forces that constrain its
pricing. Specifically, as described
above, NYSE BQT competes head-tohead with the Nasdaq Basic product and
the Cboe One Feed. These products each
serve as reasonable substitutes for one
another as they are each designed to
provide investors with a unified view of
real-time quotes and last-sale prices in
all Tape A, B, and C securities. Each
product provides subscribers with
consolidated top-of-book quotes and
trades from multiple U.S. equities
markets. In the case of NYSE BQT, this
product provides top-of-book quotes
and trades data from five NYSEaffiliated U.S. equities exchanges, which
together account for approximately 24%
of consolidated U.S. equities trading
volume as of October 2019.67 Cboe One
Feed similarly provides top-of-book
quotes and trades data from Cboe’s four
U.S. equities exchanges. NYSE BQT,
Nasdaq Basic, and Cboe One Feed are
all intended to provide indicative
pricing and are not intended to be used
for order routing or trading decisions.
In addition to competing with
proprietary data products from Nasdaq
and Cboe, NYSE BQT also competes
with the consolidated data feed.
However, the Exchange does not claim
that NYSE BQT is a substitute for
consolidated data with respect to
requirements under the Vendor Display
67 See Cboe Global Markets U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/
market/2019-10-31/.
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Rule, which is Regulation NMS Rule
603(c).
The fact that this filing is proposing
reductions in certain fees, fee credits,
and free trial periods is itself
confirmation of the inherently
competitive nature of the market for the
sale of proprietary market data. For
example, Cboe recently filed proposed
rule changes to reduce certain of its
Cboe One Feed fees and noted that it
attracted two additional customers
because of the reduced fees.68
The Exchange notes that NYSE BBO,
NYSE Trades, and NYSE BQT are
entirely optional. The Exchange is not
required to make the proprietary data
products that are the subject of this
proposed rule change available or to
offer any specific pricing alternatives to
any customers, nor is any firm or
investor required to purchase the
Exchange’s data products. Unlike some
other data products (e.g., the
consolidated quotation and last-sale
information feeds) that firms are
required to purchase in order to fulfil
regulatory obligations,69 a customer’s
68 See Securities Exchange Act Release Nos.
86667 (August 14, 2019) (SR–CboeBZX–2019–069);
86670 (August 14, 2019) (SR–CboeBYX–2019–012);
86676 (August 14, 2019) (SR–CboeEDGA–2019–
013); and 86678 (August 14, 2019) (SR–CboeEDGX–
2019–048) (Notices of filing and Immediate
effectiveness of proposed rule change to reduce fees
for the Cboe One Feed) (collectively ‘‘Cboe One Fee
Filings’’). The Cboe One Fee Filings were in effect
from August 1, 2019 until September 30, 2019,
when the Commission suspended them and
instituted proceedings to determine whether to
approve or disapprove those proposals. See, e.g.,
Securities Exchange Act Release No. 87164
(September 30, 2019), 84 FR 53208 (October 4,
2019) (SR–CboeBZX–2019–069). On October 1,
2019, the Cboe equities exchanges refiled the Cboe
One Fee Filings on the basis that they had new
customers subscribe as a result of the Cboe One Fee
Filings, and therefore its fee proposal had increased
competition for top-of-book market data. See
Securities Exchange Act Release Nos. 87312
(October 15, 2019), 84 FR 56235 (October 21, 2019)
(SR–CboeBZX–2019–086); 87305 (October 14,
2019), 84 FR 56210 (October 21, 2019) (SR–
CboeBYX–2019–015); 87295 (October 11, 2019), 84
FR 55624 (October 17, 2019) (SR–CboeEDGX–2019–
059); and 87294 (October 11, 2019), 84 FR 55638
(October 17, 2019) (SR–CboeEDGZ–2019–015)
(Notices of filing and immediate effectiveness of
proposed rule changes to re-file the Small Retail
Broker Distribution Program) (‘‘Cboe One Fee ReFilings’’). On November 26, 2019, the Commission
suspended the Cboe One Fee Re-Filings and
instituted proceedings to determine whether to
approve or disapprove those proposals. See, e.g.,
Securities Exchange Act Release No. 87629
(November 26, 2019) (SR–CboeBZX–2019–086)
(Federal Register publication pending).
69 The Exchange notes that broker-dealers are not
required to purchase proprietary market data to
comply with their best execution obligations. See In
the Matter of the Application of Securities Industry
and Financial Markets Association for Review of
Actions Taken by Self-Regulatory Organizations,
Release Nos. 34–72182; AP–3–15350; AP–3–15351
(May 16, 2014). Similarly, there is no requirement
in Regulation NMS or any other rule that
proprietary data be utilized for order routing
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decision whether to purchase any of the
Exchange’s proprietary market data
feeds is entirely discretionary. Most
firms that choose to subscribe to the
NYSE’s proprietary market data feeds do
so for the primary goals of using them
to increase their revenues, reduce their
expenses, and in some instances
compete directly with the Exchange’s
trading services. Such firms are able to
determine for themselves whether or not
the products in question or any other
similar products are attractively priced.
If the NYSE market data feeds do not
provide sufficient value to firms based
on the uses those firms may have for it,
such firms may simply choose to
conduct their business operations in
ways that do not use the products.70 A
clear illustration of this point is the fact
that today, NYSE BQT has just one
subscriber.
In addition, in the case of products
that are also redistributed through
market data vendors, such as Bloomberg
and Refinitiv, 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.
Currently, only one vendor subscribes to
NYSE BQT, and that vendor has limited
redistribution of NYSE BQT. No other
vendors currently subscribe to NYSE
BQT and likely will not unless their
customers request it, and customers will
not elect to pay the proposed fees unless
such 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.
Because of the availability of
substitutes, an exchange that overprices
its market data products stands a high
risk that users may substitute another
source of market data information for its
own. Those competitive pressures
imposed by available alternatives are
evident in the Exchange’s proposed
pricing.
In setting 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
decisions, and some broker-dealers and ATSs have
chosen not to do so.
70 See generally Jones Paper at 8, 10–11.
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all relevant factors and has not
considered irrelevant factors in order to
establish reasonable fees. The existence
of numerous alternatives to the
Exchange’s platform and, more
specifically, alternatives to the market
data products, including proprietary
data from other sources, ensures that the
Exchange cannot set unreasonable fees
when vendors and subscribers can elect
these alternatives or choose not to
purchase a specific proprietary data
product if the attendant fees are not
justified by the returns that any
particular vendor or data recipient
would achieve through the purchase.
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2. The Proposed Fees Are Reasonable
The specific fees that the Exchange
proposes for NYSE Trades and NYSE
BBO are reasonable, for the following
additional reasons.
Overall. This proposed fee change is
a result of the competitive environment,
as the Exchange seeks to decrease
certain of its fees to attract subscribers
that do not currently use the NYSE BQT
market data product. The Exchange is
proposing the fee reductions at issue to
make the Exchange’s fees more
competitive for a specific segment of
market participants, thereby increasing
the availability of the Exchange’s data
products, and expanding the options
available to firms making data
purchasing decisions based on their
business needs. The Exchange believes
that this is consistent with the
principles contained in Regulation NMS
to ‘‘promote the wide availability of
market data and to allocate revenues to
SROs that produce the most useful data
for investors.’’ 71
Amendment to Footnote 5: The
Exchange believes that the proposed
amendment to footnote 5 of the Fee
Schedule is reasonable because it does
not impose any new or different fees for
subscribers of NYSE BQT, but rather,
clarifies the Fee Schedule to reduce the
administrative burden for such
subscribers. The proposed rule change
is similar to how Nasdaq charges for its
Nasdaq Last Sale Plus product because
firms that receive that product must also
pay the monthly administrative fees for
underlying data products, but the
Nasdaq rules do not require that Nasdaq
Last Sale Plus customers also subscribe
to those underlying feeds.72
Access Fee. By adopting a reduced
access fee to access U.S. equity market
data that is used in display-only format
and that serves as the foundation of
71 See Regulation NMS Adopting Release, 70 FR
37495, at 37503.
72 See Section 138(e)(1) [sic] of the Nasdaq Equity
7 Pricing Schedule.
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NYSE BQT, the Exchange believes that
more data recipients may choose to
subscribe to these products, thereby
expanding the distribution of this
market data for the benefit of investors
that participate in the national market
system and increasing competition
generally. In addition, the proposed
reduced access fee is reasonable when
compared to similar fees for comparable
products offered by other markets. For
example, NYSE Trades provides
investors with alternative market data
and is similar to the Nasdaq Last Sale
Data Feed; Nasdaq charges
redistributors a monthly fee of $1,500
per month, which is the same as the
current access fee for NYSE Trades, and
higher than the proposed access fee for
display-only users.73 The Exchange also
believes that offering a reduced access
fee for display-only use expands the
range of options for offering the
Exchange’s market data products and
would allow data recipients greater
choice in selecting the most appropriate
level of data and fees for the
Professional and Non-Professional Users
they service.
The Exchange determined to charge
the $100 access fee for its proposed Per
User Access Fee because it constitutes a
substantial reduction of the current fee,
with the intended purpose of increasing
use of NYSE BQT. NYSE BQT has been
in place since 2014 but has only one
subscriber, which itself has limited
distribution of the product. The
Exchange believes that in order to
compete with other indicative pricing
products such as Nasdaq Basic and Cboe
One Feed, it needs to provide a
meaningful financial incentive for data
recipients to subscribe to NYSE BQT.
Accordingly, the proposed reduction to
the Access Fees for NYSE Trades and
NYSE BBO, together with the proposed
reduction to the Access Fees for NYSE
American BBO, NYSE American Trades,
NYSE Arca BBO, and NYSE Arca
Trades, is reasonable because the
reductions will make NYSE BQT a more
attractive offering for data recipients
and make it more competitive with
Nasdaq Basic and Cboe One Feed. For
example, the External Distribution Fee
for Cboe One Feed is currently $5,000
(which is the sum of the External
Distribution fees for the four exchange
data products that are included in Cboe
One Feed) plus a Data Consolidation
Fee of $1,000, for a total of $6,000.
Evidence of the competition among
exchange groups for these products has
previously been demonstrated via fee
changes. For example, following the
73 See Section 139(d) of the Nasdaq Equity 7
Pricing Schedule.
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introduction of the Cboe One Feed,
Nasdaq responded by reducing its fees
for the Nasdaq Basic product.74 With the
proposed changes by the Exchange,
NYSE, and NYSE Arca, the Exchange is
similarly seeking to compete by
decreasing the total access fees for
NYSE BQT from $6,250 to $850. This
proposed rule change therefore
demonstrates the existence of an
effective, competitive market because
this proposal resulted from a need to
generate innovative approaches in
response to competition from other
exchanges that offer market data for a
specific segment of market participants.
Redistribution Fees. Similarly, the
proposed reduction to the NYSE Trades
Redistribution Fee is reasonable because
it is designed to provide an incentive for
Redistributors to make NYSE BQT
available so that data recipients can
subscribe to NYSE BQT. The Exchange
further believes that the proposed
reduction to the NYSE Trades
Redistribution Fee is reasonable because
it is designed to compete with a similar
credit offered by the Cboe family of
equity exchanges.75
One-Month Free Trial. The Exchange
believes that the proposed rule change
to provide the NYSE market data
products to new customers free-ofcharge for their first subscription month
is reasonable because it would allow
vendors and subscribers to become
familiar with the feeds and determine
whether they suit their needs without
incurring fees. Making a new market
data product available for free for a trial
period is consistent with offerings of
other exchanges. For example, Nasdaq
offers new subscribers its market data
products a 30-day waiver of user fees.76
74 See e.g. Securities Exchange Act Release No.
83751 (July 31, 2018), 83 FR 38428 (August 6, 2018)
(SR–NASDAQ–2018–058) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
To Lower Fees and Administrative Costs for
Distributors of Nasdaq Basic, Nasdaq Last Sale, NLS
Plus and the Nasdaq Depth-of-Book Products
Through a Consolidated Enterprise License).
Nasdaq filed the proposed fee change to lower the
Enterprise Fee for Nasdaq Basic and other market
data products in response to the Enterprise Fee for
the Cboe One Feed adopted by Cboe family of
exchanges.
75 See, e.g., BZX Price List—U.S. Equities
available at https://www.nasdaqtrader.com/
Trader.aspx?id=DPUSdata#db [sic]. BZX charges
$500 per month for internal distribution, and
$2,500 per month for external distribution, of BZX
Last Sale. BZX also charges $500 per month for
internal distribution, and $2,500 per month for
external distribution, of BZX Top. Each external
distributor is eligible to receive a credit against its
monthly Distributor Fee for BZX Las [sic] Sale equal
to the amount of its monthly User Fees up to a
maximum of the Distributor Fee for BZX Las [sic]
Sale. See Cboe BZX U.S. Equities Exchange Fee
Schedule at https://markets.cboe.com/us/equities/
membership/fee_schedule/bzx/.
76 See Section 112(b)(1) of Nasdaq’s Equity 7
Pricing Schedule.
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Deletion of Obsolete Text. The
Exchange believes that it is reasonable
to delete references to obsolete rule text
and dates from the Fee Schedule and to
make non-substantive clarifying
amendments. The Exchange believes
that the proposed changes are
reasonable because they would result in
greater specificity and precision within
the Fee Schedule, which would
contribute to reasonably ensuring that
the fees described there are clear and
accurate. Specifically, the proposed
changes are reasonable because they
would remove obsolete rule text and
dates from the Fee Schedule related to
a Decommission Extension Fee that is
no longer charged by the Exchange and
provide greater specificity regarding the
application of the Enterprise Fee.
For all of the foregoing reasons, the
Exchange believes that the proposed
fees are reasonable.
The Proposed Fees Are Equitably
Allocated
The Exchange believes the proposed
fees for NYSE Trades and NYSE BBO
are allocated fairly and equitably among
the various categories of users of the
feed, and any differences among
categories of users are justified.
Overall. As noted above, this
proposed fee change is a result of the
competitive environment for market
data products that provide indicative
pricing information across a family of
exchanges. To respond to this
competitive environment, the Exchange
seeks to amend its fees to access NYSE
Trades and NYSE BBO in a display-only
format, which the Exchange hopes will
attract additional subscribers for its
NYSE BQT market data product. The
Exchange is proposing the fee
reductions to make the Exchange’s fees
more competitive for a specific segment
of market participants, thereby
increasing the availability of the
Exchange’s data products, expanding
the options available to firms making
data purchasing decisions based on
their business needs, and generally
increasing competition.
Amendment to Footnote 5: The
Exchange believes that the proposed
amendment to footnote 5 of the Fee
Schedule is equitably allocated. The
proposed change does not impose any
new or different fees for subscribers of
NYSE BQT, but rather, clarifies the Fee
Schedule to reduce the administrative
burden for all subscribers of the NYSE
BQT product.
Access Fee. The Exchange believes
that the proposed Per User Access Fee
is equitable as it would apply equally to
all data recipients that choose to
subscribe to NYSE Trades or NYSE BBO
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in a display-only format. Because NYSE
BBO and NYSE Trades are optional
products, any data recipient could
choose to subscribe to NYSE BBO or
NYSE Trades for display-only use and
be eligible for the proposed reduced fee.
The Exchange does not believe that it is
inequitable that this proposed fee
reduction would be available only to
data recipients that use NYSE Trades or
NYSE BBO in a display-only format.
Non-display data represents a different
set of use cases than display-only usage;
non-display data can be used by data
recipients for a wide variety of profitgenerating purposes, including
proprietary and agency trading and
smart order routing, as well as by data
recipients that operate order matching
and execution platforms that compete
directly with the Exchange for order
flow. The data also can be used for a
variety of non-trading purposes that
indirectly support trading, such as risk
management and compliance. Although
some of these non-trading uses do not
directly generate revenues, they can
nonetheless substantially reduce the
recipient’s costs by automating such
functions so that they can be carried out
in a more efficient and accurate manner
and reduce errors and labor costs,
thereby benefiting end users. The
Exchange believes that charging a
different access fee for non-display use
is equitable because data recipients can
derive substantial value from such uses,
for example, by automating tasks so that
can be performed more quickly and
accurately and less expensively than if
they were performed manually.
Redistribution Fees. The Exchange
believes the proposed change to provide
a credit to a Redistributor that externally
redistributes NYSE Trades to
Professional and Non-Professional Users
in a display-only format in an amount
equal to the monthly Professional User
and Non-Professional User fees for such
external distribution, up to a maximum
of the Redistribution Fee, is equitably
allocated. The proposed change would
apply equally to all Redistributors that
choose to externally redistribute the
NYSE Trades product, and would serve
as an incentive for Redistributors to
make NYSE Trades more broadly
available for use by both Professional
and Non-Professional Users. This, in
turn, could provide an incentive for
Redistributors to make NYSE BQT
available to their customers.
One-Month Free Trial. The Exchange
believes the proposal to provide the
NYSE market data products to new
customers free-of-charge for their first
subscription month is equitable because
it applies to any first-time subscriber,
regardless of the use they plan to make
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71513
of the feed. As proposed, any first-time
subscriber would not be charged the
Access Fee, Non-Display Fee, any
applicable Professional and NonProfessional User Fee, or Redistribution
Fee for any of the NYSE market data
products for one calendar month. The
Exchange believes it is equitable to
restrict the availability of this onemonth free trial to customers that have
not previously subscribed to any NYSE
market data product, since customers
who are current or previous subscribers
are already familiar with the products
and whether they would suits their
needs.
Deletion of Obsolete Text. The
Exchange believes that deleting obsolete
rule text and dates from the Fee
Schedule and make non-substantive
clarifying amendments is equitably
allocated because these proposed
changes do not change fees, but rather,
result in greater specificity and
precision within the Fee Schedule,
which would contribute to reasonably
ensuring that the fees described there
are clear and accurate. The Exchange
also believes that the proposed changes
are equitable because all readers of the
Fee Schedule would benefit from the
increased specificity and clarity that
this proposed rule change would
provide.
For all of the foregoing reasons, the
Exchange believes that the proposed
fees for the NYSE market data products
are equitably allocated.
The Proposed Fees Are Not Unfairly
Discriminatory
The Exchange believes the proposed
fees are not unfairly discriminatory
because any differences in the
application of the fees are based on
meaningful distinctions between
customers, and those meaningful
distinctions are not unfairly
discriminatory between customers.
Overall. As noted above, this
proposed fee change is a result of the
competitive environment for market
data products that provide indicative
pricing information across a family of
exchanges. To respond to this
competitive environment, the Exchange
seeks to amend its fees to access NYSE
Trades and NYSE BBO in a display-only
format, which the Exchange hopes will
attract more subscribers for its NYSE
BQT market data product. The Exchange
is proposing the fee reductions to make
the Exchange’s fees more competitive
for a specific segment of market
participants, thereby increasing the
availability of the Exchange’s data
products, expanding the options
available to firms making data
purchasing decisions based on their
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business needs, and generally increasing
competition.
Amendment to Footnote 5: The
Exchange believes that the proposed
amendment to footnote 5 of the Fee
Schedule is not unfairly discriminatory.
The proposed change does not impose
any new or different fees for any
subscribers of NYSE BQT, but rather,
clarifies the Fee Schedule to reduce the
administrative burden for all subscribers
of the NYSE BQT product.
Access Fee. The Exchange believes
that the proposed Per User Access Fee
is not unfairly discriminatory as it
would apply equally to all data
recipients that choose to subscribe to
NYSE Trades or NYSE BBO in a
display-only format. Because NYSE
BBO and NYSE Trades are optional
products, any data recipient could
choose to subscribe to NYSE BBO or
NYSE Trades for display-only use and
be eligible for the proposed reduced fee.
The Exchange does not believe that it is
unfairly discriminatory that this
proposed fee reduction would be
available only to data recipients that use
NYSE Trades or NYSE BBO in a
display-only format. Non-display data
can be used by data recipients for a
wide variety of profit-generating
purposes, including proprietary and
agency trading and smart order routing,
as well as by data recipients that operate
order matching and execution platforms
that compete directly with the Exchange
for order flow. The data also can be used
for a variety of non-trading purposes
that indirectly support trading, such as
risk management and compliance.
While some of these non-trading uses do
not directly generate revenues, they can
nonetheless substantially reduce the
recipient’s costs by automating such
functions so that they can be carried out
in a more efficient and accurate manner
and reduce errors and labor costs,
thereby benefiting end users. The
Exchange therefore believes that there is
a meaningful distinction between
display and non-display users of market
data and that charging a different access
fee for non-display use is not unfairly
discriminatory because data recipients
can derive substantial value from such
non-display uses, for example, by
automating tasks so that can be
performed more quickly and accurately
and less expensively than if they were
performed manually.
Redistribution Fees. The Exchange
believes the proposed change to provide
a credit to a Redistributor that externally
redistributes NYSE Trades to
Professional and Non-Professional Users
in a display-only format in an amount
equal to the monthly Professional User
and Non-Professional User fees for such
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external distribution, up to a maximum
of the Redistribution Fee, is not unfairly
discriminatory. The proposed credit
would apply equally to all
Redistributors that choose to externally
redistribute the NYSE Trades product
for display use, and would serve as an
incentive for Redistributors to make
NYSE Trades more broadly available for
use by both Professional and NonProfessional Users. This, in turn, could
provide an incentive for Redistributors
to make NYSE BQT available to their
customers.
The Exchange believes that there is a
meaningful distinction between vendors
that distribute market data in a displayonly format, as such vendors are more
likely to service the non-professional
community, and vendors that distribute
market data for non-display use only, as
users of non-display data are more
likely to be professionals that derive
substantial value from such non-display
uses. While this credit is not available
to vendors that redistribute NYSE
Trades for non-display use only, such
vendors would be eligible for this credit
if they choose to expand their
distribution of NYSE Trades for display
use. NYSE BQT is targeted for display
use and the Exchange believes that the
proposed credit would increase the
number of Redistributors—whether
current vendors that redistribute on a
non-display only basis or new
vendors—that would make NYSE BQT
available to their customers.
One-Month Free Trial. The Exchange
believes that the proposed rule change
providing for a one-month free trial
period to test is not unfairly
discriminatory because the financial
benefit of the fee waiver would be
available to all firms subscribing to a
NYSE market data product for the first
time on a free-trial basis. The Exchange
believes there is a meaningful
distinction between customers that are
subscribing to a market data for the first
time, who may benefit from a period
within which to set up and test use of
the product before it becomes fee liable,
and users that are already receiving the
Exchange’s market data products and
are deriving value from such use. The
Exchange believes that the limited
period of the free trial would not be
unfairly discriminatory to other users of
the Exchange’s market data products
because it is designed to provide a
reasonable period of time to set up and
test a new market data product. The
Exchange further believes that providing
a free trial for a calendar month would
ease administrative burdens for data
recipients to subscribe to a new data
product and eliminate fees for a period
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before such users are able to derive any
benefit from the data.
Deletion of Obsolete Text. The
Exchange believes that deleting obsolete
rule text and dates from the Fee
Schedule and make non-substantive
clarifying amendments is not unfairly
discriminatory because these proposed
changes do not change fees, but rather,
result in greater specificity and
precision within the Fee Schedule,
which would contribute to reasonably
ensuring that the fees described there
are clear and accurate. The Exchange
also believes that the proposed changes
are not unfairly discriminatory because
all readers of the Fee Schedule would
benefit from the increased specificity
and clarity that this proposed rule
change would provide.
For all of the foregoing reasons, the
Exchange believes that the proposed
fees are not unfairly discriminatory.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
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.
Intramarket Competition. The
Exchange believes that the proposed
fees do not put any market participants
at a relative disadvantage compared to
other market participants. As noted
above, the proposed fee schedule would
apply to all subscribers of NYSE market
data products, and customers may not
only choose whether to subscribe to the
products at all, but also may tailor their
subscriptions to include only the
products and uses that they deem
suitable for their business needs.
The Exchange also believes that the
proposed fees neither favor nor penalize
one or more categories of market
participants in a manner that would
impose an undue market on
competition. As shown above, to the
extent that particular proposed fees
apply to only a subset of subscribers,
those distinctions are not unfairly
discriminatory and do unfairly burden
one set of customers over another. To
the contrary, by tailoring the proposed
fees in this manner, the Exchange
believes that it has eliminated the
potential burden on competition that
might result, for instance, from unfairly
asking vendors that distribute market
data in a display-only format to pay the
same fees as vendors that distribute
market data for non-display use to
professionals that derive substantial
value from such non-display uses.
Intermarket Competition. The
Exchange believes that the proposed
fees do not impose a burden on
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competition or on other exchanges that
is not necessary or appropriate; indeed,
the Exchange believes the proposed fee
changes would have the effect of
increasing competition. As
demonstrated above and in Professor
Rysman’s attached paper, exchanges are
platforms for market data and trading. In
setting the proposed fees, the Exchange
is constrained by the availability of
substitute platforms also offering market
data products and trading, and low
barriers to entry mean new exchange
platforms are frequently introduced.
The fact that exchanges are platforms
ensures that no exchange can make
pricing decisions for one side of its
platform without considering, and being
constrained by, the effects that price
will have on the other side of the
platform. In setting fees at issue here,
the Exchange is constrained by the fact
that, if its pricing across the platform is
unattractive to customers, customers
will have its pick of an increasing
number of alternative platforms to use
instead of the Exchange. Given this
intense competition between platforms,
no one exchange’s market data fees can
impose an unnecessary burden on
competition, and the Exchange’s
proposed fees do not do so here.
In addition, the Exchange believes
that the proposed fees do not impose a
burden on competition or on other
exchanges that is not necessary or
appropriate because of the availability
of numerous substitute market data
products. Specifically, as described
above, NYSE BQT competes head-tohead with the Nasdaq Basic product and
the Cboe One Feed. These products each
serve as reasonable substitutes for one
another as they are each designed to
provide investors with a unified view of
real-time quotes and last-sale prices in
all Tape A, B, and C securities. Each
product provides subscribers with
consolidated top-of-book quotes and
trades from multiple U.S. equities
markets. NYSE BQT provides top-ofbook quotes and trades data from five
NYSE-affiliated U.S. equities exchanges,
while Cboe One Feed similarly provides
top-of-book quotes and trades data from
Cboe’s four U.S. equities exchanges.
NYSE BQT, Nasdaq Basic, and Cboe
One Feed are all intended to provide
indicative pricing and therefore, are
reasonable substitutes for one another.
Additionally, market data vendors are
also able to offer close substitutes to
NYSE BQT. Because market data users
can find suitable substitute feeds, an
exchange that overprices its market data
products stands a high risk that users
may substitute another source of market
data information for its own. These
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competitive pressures ensure that no
one exchange’s market data fees can
impose an unnecessary burden on
competition, and the Exchange’s
proposed fees do not do so here.
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) 77 of the Act and
subparagraph (f)(2) of Rule 19b–4 78
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) 79 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:
71515
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–2019–70 and should
be submitted on or before January 17,
2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.80
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2019–27871 Filed 12–26–19; 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
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSE–2019–70 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to File
Number SR–NYSE–2019–70. This file
number should be included on the
77 15
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
79 15 U.S.C. 78s(b)(2)(B).
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–87808; File No. SR–CBOE–
2019–125]
Self-Regulatory Organizations; Cboe
Exchange, Inc.; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change to Amend the Silexx
Trading Platform (‘‘Silexx’’ or the
‘‘Platform’’) Fees Schedule
December 19, 2019.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
78 17
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80 17
E:\FR\FM\27DEN1.SGM
CFR 200.30–3(a)(12).
27DEN1
]]>Agencies
[Federal Register Volume 84, Number 248 (Friday, December 27, 2019)]
[Notices]
[Pages 71505-71515]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2019-27871]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-87803; File No. SR-NYSE-2019-70]
Self-Regulatory Organizations; New York Stock Exchange LLC;
Notice of Filing and Immediate Effectiveness of Proposed Rule Change,
as Modified by Partial Amendment No. 1, To Amend the Fees for NYSE BBO
and NYSE Trades
December 19, 2019.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act'') \1\ and Rule 19b-4 thereunder,\2\ notice is hereby given
that, on December 4, 2019, New York Stock Exchange LLC (``NYSE'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'') a proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. On
December 17, 2019, the Exchange filed Partial Amendment No. 1 to the
proposed rule change.\3\ The Commission is publishing this notice to
solicit comments on the proposed rule change, as modified by Partial
Amendment No. 1, from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ In Partial Amendment No. 1, the Exchange provided an
additional example in support of the proposed rule change.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to (1) amend the fees for NYSE BBO and NYSE
Trades by modifying the application of the Access Fee; (2) amend the
fees for NYSE Trades by adopting a credit applicable to the
Redistribution Fee; and (3) adopt a one-month free trial for all NYSE
market data products. The Exchange also proposes to remove certain
obsolete text. The Exchange proposes to implement the proposed fee
changes on February 3, 2020. 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.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to decrease the fees for certain NYSE market
data products, as set forth on the NYSE Proprietary Market Data Fee
Schedule (``Fee Schedule''). These fee decreases, taken together with
fee decreases filed by the Exchange's affiliated exchanges, NYSE Arca,
Inc. (``NYSE Arca'') and NYSE American LLC (``NYSE American''),\4\ will
reduce the fees associated with the NYSE BQT proprietary data product,
which competes directly with similar products offered by both the
Nasdaq and Cboe families of U.S. equity exchanges. Collectively, the
proposed fee decreases are intended to respond to the competition posed
by similar products offered by the other exchange groups.
---------------------------------------------------------------------------
\4\ See SR-NYSEArca-2019-88 and SR-NYSEAmer-2019-55.
---------------------------------------------------------------------------
Specifically, the Exchange proposes to (1) reduce the Access Fees
by more than 93% for subscribers of NYSE BBO and NYSE Trades that
receive a data feed and use those market data products in a display-
only format; (2) provide for a credit applicable to the Redistribution
Fee for subscribers of NYSE Trades that use that market data product
for display purposes; and (3) adopt a one-month free trial for all NYSE
market data products. The Exchange also proposes non-substantive
changes to remove certain obsolete text from the Fee Schedule. All of
the proposed changes would decrease fees for market data on the
Exchange.
The Exchange proposes to implement these proposed fee changes on
February 3, 2020.
Background
The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues, and also recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \5\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS Adopting Release'').
---------------------------------------------------------------------------
As the Commission itself recognized, the market for trading
services in NMS stocks has become ``more fragmented and competitive.''
\6\ Indeed, equity trading is currently dispersed across 13
exchanges,\7\ 31 alternative trading systems,\8\ and numerous broker-
dealer internalizers and wholesalers, all competing for order flow.
Based on publicly-available information, no single exchange currently
has more than 18% market share (whether including or excluding auction
volume).\9\
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 51808, 84 FR 5202,
5253 (February 20, 2019) (File No. S7-05-18) (Transaction Fee Pilot
for NMS Stocks Final Rule) (``Transaction Fee Pilot'').
\7\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, available at https://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
\8\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of
alternative trading systems registered with the Commission is
available at https://www.sec.gov/foia/docs/atslist.htm.
\9\ See Cboe Global Markets U.S. Equities Market Volume Summary,
available at https://markets.cboe.com/us/equities/market_share/.
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With the NYSE BQT market data product, NYSE and its affiliates
compete
[[Page 71506]]
head to head with the Nasdaq Basic \10\ and Cboe One Feed \11\ market
data products. Similar to those market data products, NYSE BQT, which
was established in 2014,\12\ consists of certain elements from the NYSE
BBO and NYSE Trades market data products as well as from market data
products from the Exchange's affiliates, NYSE Arca, NYSE American, NYSE
National, Inc. (``NYSE National''),\13\ and NYSE Chicago, Inc. (``NYSE
Chicago'').\14\ Similar to both Nasdaq Basic and the Cboe One Feed,
NYSE BQT provides investors with a unified view of comprehensive last
sale and BBO data in all Tape A, B, and C securities that trade on the
Exchange, NYSE Arca, NYSE American, NYSE National, and NYSE Chicago.
Also similar to Nasdaq Basic and the Cboe One Feed, NYSE BQT is not
intended to be used for purposes of making order-routing or trading
decisions, but rather provides indicative prices for Tape A, B, and C
securities.\15\
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\10\ As described on the Nasdaq website, available here: https://www.nasdaqtrader.com/Trader.aspx?id=nasdaqbasic, Nasdaq Basic is a
``low cost alternative'' that provides ``Best Bid and Offer and Last
Sale information for all U.S. exchange-listed securities based on
liquidity within the Nasdaq market center, as well as trades
reported to the FINRA Trade Reporting Facility (``TRF'').''
\11\ As described on the Cboe website, available here: https://markets.cboe.com/us/equities/market_data_services/cboe_one/, the
Cboe One Feed is a ``market data product that provides cost-
effective, high-quality reference quotes and trade data for market
participants looking for comprehensive, real-time market data'' and
provides a ``unified view of the market from all four Cboe equity
exchanges: BZX Exchange, BYX Exchange, EDGX Exchange, and EDGY [sic]
Exchange.''
\12\ See Securities Exchange Act Release Nos. 72750 (August 4,
2014), 79 FR 46494 (August 8, 2014) (notice--NYSE BQT); and 73553
(November 6, 2014), 79 FR 67491 (November 13, 2014) (approval
order--NYSE BQT) (SR-NYSE-2014-40) (``NYSE BQT Filing'').
\13\ In 2018, NYSE BQT was amended to include NYSE National BBO
and NYSE National Trades. See Securities Exchange Act Release No.
83359 (June 1, 2018), 83 FR 26507 (June 7, 2018) (SR-NYSE-2018-22).
\14\ In 2019, NYSE BQT was amended to include NYSE Chicago BBO
and NYSE Chicago Trades. See Securities Exchange Act Release No.
87511 (November 12, 2019), 84 FR 63689 (November 18, 2019) (SR-NYSE-
2019-60).
\15\ See NYSE BQT Filing, supra note 12.
---------------------------------------------------------------------------
The Exchange currently charges an access fee of $250 per month for
NYSE BQT, and, as provided for in footnote 5 to the Fee Schedule, to
subscribe to NYSE BQT, subscribers must also subscribe to, and pay
applicable fees for NYSE BBO, NYSE Trades, NYSE Arca BBO, NYSE Arca
Trades, NYSE American BBO, NYSE American Trades, NYSE National BBO,
NYSE National Trades, NYSE Chicago BBO, and NYSE Chicago Trades. Thus,
the charges for NYSE BQT are the $250 access fee for NYSE BQT,\16\ plus
a $1,500 access fee for each of NYSE BBO and NYSE Trades, plus a $750
access fee for each of NYSE Arca BBO and NYSE Arca trades,\17\ plus a
$750 access fee for each of NYSE American BBO and NYSE American
Trades,\18\ for a total of $6,250 ($250 + $3,000 + $1,500 +
$1,500).\19\ In addition, an NYSE BQT subscriber would need to pay for
the applicable Professional or Non-Professional User Fees for the
underlying market data products, as applicable.\20\
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\16\ The Exchange is not proposing any change to the $250 access
fee for NYSE BQT.
\17\ See NYSE Arca Equities Proprietary Market Data Fees (``NYSE
Arca Price List''), available here: https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Equities_Fee_Schedule.pdf.
\18\ See NYSE American Equities Proprietary Market Data Fees
(``NYSE American Price List''), available here: https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Equities_Fee_Schedule.pdf.
\19\ There are currently no fees charged for the NYSE National
BBO, NYSE National Trades, NYSE Chicago BBO, or NYSE Chicago Trades
market data products.
\20\ The Exchange is not proposing any changes to the User Fees.
Currently, the Professional User Fees for each of NYSE BBO and NYSE
Trades is $4 per month, and the Non-Professional User Fees for each
of NYSE BBO and NYSE Trades is $0.20 per month. See Fees Schedule,
available here: https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Fee_Schedule.pdf. The Professional User Fees for
each of NYSE Arca BBO and NYSE Arca Trades is $4 per month, and the
Non-Professional User Fees for each of NYSE Arca BBO and NYSE Arca
Trades is $0.25 per month. See NYSE Arca Price List, available here:
https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Equities_Fee_Schedule.pdf. The Professional User Fees for
each of NYSE American BBO and NYSE American Trades is $4 per month,
and the Non-Professional User Fees for each of NYSE American BBO and
NYSE American Trades is $0.25 per month. See NYSE American Price
List, available here: https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Equities_Fee_Schedule.pdf.
---------------------------------------------------------------------------
To reduce administrative burdens on subscribers of NYSE BQT, the
Exchange does not currently require NYSE BQT subscribers to complete
separate paperwork for each of the underlying market data products.
Rather, NYSE BQT subscribers need only subscribe to NYSE BQT, and then
NYSE charges such subscribers for the underlying market data feeds as
part of the fees for NYSE BQT. To promote transparency of how data
recipients would subscribe to NYSE BQT, the Exchange proposes to amend
footnote 5 to the Fee Schedule to provide that ``[t]o subscribe to NYSE
BQT, subscribers must also [sic] pay applicable fees for'' the
underlying market data products, and would delete the text that
requires NYSE BQT subscribers to separately subscribe to the underlying
market data products. This proposed amendment does not change the fees
for NYSE BQT.
Because NYSE BQT is priced based on the fees associated with the
underlying ten market data feeds, the Exchange and its affiliates
propose to compete with the Cboe One Feed and Nasdaq Basic by reducing
fees for the underlying market data products that comprise NYSE BQT.
Together with NYSE Arca and NYSE American, the Exchange similarly
proposes to compete for subscribers to NYSE BQT by designing its fee
decreases to be attractive to subscribers of NYSE BBO and NYSE Trades
that use such products for display-only purposes, which are more likely
to be subscribers that service retail investors.
Access Fee--NYSE BBO and NYSE Trades
NYSE BBO is a NYSE-only market data product that allows a vendor to
redistribute on a real-time basis the same best-bid-and-offer
information that NYSE reports under the Consolidated Quotation Plan
(``CQ Plan'') for inclusion in the CQ Plan's consolidated quotation
information data stream (``NYSE BBO Information'').\21\ NYSE BBO
Information includes the best bids and offers for all securities that
are traded on the Exchange and for which NYSE reports quotes under the
CQ Plan. NYSE BBO is available over a single data feed, regardless of
the markets on which the securities are listed. NYSE BBO is made
available to its subscribers no earlier than the information it
contains is made available to the processor under the CQ Plan.
---------------------------------------------------------------------------
\21\ See Securities Exchange Act Release Nos. 61914 (April 14,
2010), 75 FR 21077 (April 22, 2010) (SR-NYSE-2010-30) (notice--NYSE
BBO); and 62181 (May 26, 2010), 75 FR 31488 (June 3, 2010) (SR-NYSE-
2010-30) (approval order--NYSE BBO).
---------------------------------------------------------------------------
NYSE Trades is a NYSE-only market data product that allows a vendor
to redistribute on a real-time basis the same last sale information
that NYSE reports to the Consolidated Tape Association (``CTA'') for
inclusion in the CTA's consolidated data stream and certain other
related data elements (``NYSE Last Sale Information'').\22\ NYSE Last
Sale Information includes last sale information for all securities that
are traded on the Exchange. NYSE Trades is made available to
subscribers at the same time as the information it contains is made
available to the processor under the CTA Plan.
---------------------------------------------------------------------------
\22\ See Securities Exchange Act Release Nos. 59309 (January 28,
2009), 74 FR 6073 (February 4, 2009) (SR-NYSE-2009-04) (notice--NYSE
Trades); and 59309 (March 19, 2009), 74 FR 13293 (March 26, 2009)
(SR-NYSE-2009-04) (approval order--NYSE Trades).
---------------------------------------------------------------------------
Currently, subscribers of each of the NYSE BBO and NYSE Trades
products that receive a data feed pay an Access Fee of $1,500 per
month. The Exchange
[[Page 71507]]
proposes to reduce the Access Fees for subscribers of NYSE BBO and NYSE
Trades that receive a data feed and use those products in a display-
only format, including for internal use for Professional Users and
external distribution to both Professional and Non-Professional Users
in a display-only format, from $1,500 per month (per product) to $100
per month (per product). The Exchange proposes to designate this access
fee as a ``Per User Access Fee.'' A subscriber that receives a data
feed and uses the market data product for any other purpose (such as a
non-display use), including if combined with Per User use, would
continue to pay the $1,500 per month Access Fee.\23\ A subscriber will
be charged only one access fee for each of the NYSE BBO and NYSE Trades
products, depending on the use of that product.
---------------------------------------------------------------------------
\23\ With the proposed adoption of the Per User Access Fee, the
Exchange proposes to rename the Access Fee as the General Access
Fee.
---------------------------------------------------------------------------
The proposed rule change would result in lower fees for subscribers
of each of the NYSE BBO and NYSE Trades products that receive a data
feed and use such products for display-only purposes. The proposed Per
User Access Fee of $100 per month, lowered from $1,500 per month, would
result in a reduction of more than 93% for subscribers that receive a
data feed and use the product in a display-only format. Additionally,
the proposed rule change, together with the corresponding proposed rule
changes by NYSE Arca and NYSE American to similarly reduce the access
fees to their BBO and Trades products, would also significantly lower
access fees for display-only subscribers of NYSE BQT, from $6,250 per
month to $850 per month ($250 + $200 + $200 + $200), a reduction of
more than 86%.
The proposed rule change is intended to encourage greater use of
NYSE BQT by making it more affordable for data recipients that receive
a data feed of NYSE Trades and NYSE BBO and use the products in a
display-only format and thereby, allow the Exchange to compete more
effectively with Cboe One Feed and Nasdaq Basic. The Exchange believes
the proposed rule change would allow the Exchange to offer retail
investors a competitively priced alternative to other top-of-book data
products available in the marketplace.
Redistribution Fee--NYSE Trades
The Exchange currently charges a Redistribution Fee of $1,000 per
month for NYSE Trades. A Redistributor is a vendor or any other person
that provides a NYSE data product to a data recipient or to any system
that a data recipient uses, irrespective of the means of transmission
or access. A Redistributor is required to report to the Exchange each
month the number of Professional and Non-Professional Users and data
feed recipients that receive NYSE Trades. As noted above, for display
use of NYSE Trades, the Exchange currently charges a Per User Fee of $4
per month for each Professional User and a Per User Fee of $0.20 per
month for each Non-Professional User. These user fees apply to each
display device that has access to NYSE Trades.
The Exchange proposes to adopt a credit that would be applicable to
Redistributors that provide external distribution of NYSE Trades to
Professional and Non-Professional Users in a display-only format. As
proposed, such Redistributors would receive a credit equal to the
amount of the monthly Professional User and Non-Professional User Fees
for such external distribution, up to a maximum of the Redistribution
Fee for NYSE Trades. For example, a Redistributor that reports external
Professional Users and Non-Professional Users in a month totaling
$1,000 or more would receive a maximum credit of $1,000 for that month,
which could effectively reduce its Redistribution Fee to zero. If that
same Redistributor were to report external User quantities in a month
totaling $500 of monthly usage, that Redistributor would receive a
credit of $500. Redistributors would have an incentive to increase
their redistribution of NYSE Trades because the credit they would be
eligible to receive would increase if they report additional external
User quantities.
By targeting this proposed credit to Redistributors that provide
external distribution of NYSE Trades in a display-only product, the
Exchange believes that this proposed fee decrease would provide an
incentive for Redistributors to make the NYSE BQT market data product
available to its customers. Specifically, if a data recipient is
interested in subscribing to NYSE BQT and relies on a Redistributor to
obtain market data products from the Exchange, that data recipient
would need its Redistributor to redistribute NYSE BQT. Currently,
Redistributors that redistribute NYSE market data products do not
necessarily also make NYSE BQT available. Because data recipients that
use NYSE BQT do so for display-only use, and therefore would use the
NYSE Trades market data product for display-only use, the Exchange
believes that this proposed fee decrease for Redistributors of NYSE
Trades would provide an incentive for Redistributors to make NYSE BQT
available to its customers, which will increase the availability of
NYSE BQT to a larger potential population of data recipients.\24\
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\24\ NYSE does not charge a Redistribution Fee for NYSE BBO.
---------------------------------------------------------------------------
One-Month Free Trial--All NYSE Market Data Products
The Exchange proposes a one-month free trial for any firm that
subscribes to a particular NYSE market data product for the first time.
As proposed, a first-time subscriber would be any firm that has not
previously subscribed to a particular NYSE market data product listed
on the Fee Schedule. As proposed, a first-time subscriber of a
particular NYSE market data product would not be charged the Access
Fee, Non-Display Fee, any applicable Professional and Non-Professional
User Fee, and Redistribution Fee for that product for one calendar
month. For example, a firm that currently subscribes to NYSE BBO would
be eligible to receive a free one-month trial of NYSE Trades, whether
in a display-only format or for non-display use. On the other hand, a
firm that currently pays an Access Fee and receives NYSE BBO for non-
display use would not be eligible to receive a free one-month trial of
NYSE BBO in a display-only format. The proposed free trial would be for
the first full calendar month following the date a subscriber is
approved to receive trial access to the particular NYSE market data
product. The Exchange would provide the one-month free trial for each
particular product to each subscriber once.
The Exchange believes that providing a one-month free trial to NYSE
market data products listed on the Fee Schedule would enable potential
subscribers to determine whether a particular NYSE market data product
provides value to their business models before fully committing to
expend development and implementation costs related to the receipt of
that product, and is intended to encourage increased use of the
Exchange's market data products by defraying some of the development
and implementation costs subscribers would ordinarily have to expend
before using a product.
Non-Substantive Changes
In March 2016, the Exchange amended the Fee Schedule to adopt
footnote 3 regarding a Decommission Extension Fee for receipt of the
NYSE BBO and NYSE Trades market data
[[Page 71508]]
products.\25\ And in October 2016, the Exchange amended the Fee
Schedule to adopt footnote 7 regarding a Decommission Extension Fee for
receipt of the NYSE Order Imbalances market data product.\26\ The
Decommission Extension Fee for NYSE BBO, NYSE Trades, and NYSE Order
Imbalances was adopted to allow existing subscribers at the time to
receive these market data products in their legacy format, as the
Exchange was then transitioning to a newer distribution protocol. The
Decommission Extension Fee for NYSE BBO and NYSE Trades expired on
September 1, 2016, and the Decommission Extension Fee for NYSE Order
Imbalances expired on April 28, 2017. The Exchange proposes to remove
rule text regarding the Decommission Extension Fee for NYSE BBO and
NYSE Trades from footnote 3 of the Fee Schedule, and for NYSE Order
Imbalances from footnote 7 of the Fee Schedule, as that rule text is
now obsolete because the period of time during which the Decommission
Extension Fee for NYSE BBO and NYSE Trades and for NYSE Order
Imbalances was applicable has passed. The Exchange proposes to mark
footnote 3 as ``Reserved,'' and replace the text in footnote 7 with
rule text regarding the proposed fee change related to the
Redistribution Fee for NYSE Trades described above.
---------------------------------------------------------------------------
\25\ See Securities Exchange Act Release No. 77388 (March 17,
2016), 81 FR 15363 (March 22, 2016) (SR-NYSE-2016-21).
\26\ See Securities Exchange Act Release No. 79286 (November 10,
2016), 81 FR 81186 (November 17, 2016) (SR-NYSE-2016-73).
---------------------------------------------------------------------------
The Exchange also proposes a non-substantive amendment to move the
text describing the Enterprise Fee on the Fee Schedule to appear below
the Non-Professional User Fee. The Exchange is not making any
substantive changes to this fee. The Exchange believes that this
proposed non-substantive change will make the Fee Schedule easier to
navigate, as the Enterprise Fee is related to Per User fees.
The Exchange also proposes a non-substantive, clarifying amendment
to footnote 4 to delete the term ``clients'' and replace it with the
term ``Professional Users and Non-Professional Users.'' This proposed
change is consistent with the operation of the Enterprise Fee, which
relates only to the Professional User and Non-Professional Per User
Fees. The Exchange believes that this proposed change would promote
clarity and transparency of the Fee Schedule, without making any
substantive changes.
Applicability of Proposed Rule Change
As noted above, the proposed rule change is designed to reduce the
overall cost of NYSE BQT by reducing specified fees applicable to the
underlying market data products that comprise NYSE BQT. The Exchange
currently has only one subscriber to NYSE BQT (a vendor), and believes
that the proposed rule change would provide an incentive both for data
subscribers to subscribe to NYSE BQT and for Redistributors to
subscribe to the product for purposes of providing external
distribution of NYSE BQT.
Because the proposed rule change is targeted to potential customers
of NYSE BQT, which is designed to be a product for display-only data
subscribers, the proposed changes to the NYSE BBO and NYSE Trades
Access Fees, together with the proposed changes on NYSE Arca and NYSE
American, are narrowly construed with that purpose in mind.
Accordingly, these proposed fee changes are not designed for data
subscribers that use NYSE BBO or NYSE Trades for non-display use, or
for Redistributors that redistribute NYSE Trades to data subscribers
that use that market data product for non-display uses. This proposed
rule change would not result in any changes to the market data fees for
NYSE BBO and NYSE Trades for such data subscribers.
The Exchange believes that two current subscribers to the NYSE BBO
and NYSE Trades market data products would meet the qualifications to
be eligible for these proposed fee changes. The Exchange further
believes that this proposed rule change has the potential to attract
new Redistributors for NYSE BQT, as well as new NYSE BQT subscribers
that would be subscribing to NYSE BBO and NYSE Trades for the first
time.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\27\ in general, and
Sections 6(b)(4) and 6(b)(5) of the Act,\28\ in particular, in that it
provides an equitable allocation of reasonable fees among users and
recipients of the data and is not designed to permit unfair
discrimination among customers, issuers, and brokers.
---------------------------------------------------------------------------
\27\ 15 U.S.C. 78f(b).
\28\ 15 U.S.C. 78f(b)(4), (5).
---------------------------------------------------------------------------
The Proposed Rule Change Is Reasonable
In adopting Regulation NMS, the Commission granted SROs and broker-
dealers increased authority and flexibility to offer new and unique
market data to the public. The Commission has repeatedly expressed its
preference for competition over regulatory intervention in determining
prices, products, and services in the securities markets. Specifically,
in Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues, and also recognized that
current regulation of the market system ``has been remarkably
successful in promoting market competition in its broader forms that
are most important to investors and listed companies.'' \29\
---------------------------------------------------------------------------
\29\ See Regulation NMS Adopting Release, 70 FR 37495, at 37499.
---------------------------------------------------------------------------
With respect to market data, the decision of the United States
Court of Appeals for the District of Columbia Circuit in NetCoalition
v. SEC upheld the Commission's reliance on the existence of competitive
market mechanisms to evaluate the reasonableness and fairness of fees
for proprietary market data:
In fact, the legislative history indicates that the Congress
intended that the market system ``evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed'' and that the SEC wield its regulatory power ``in those
situations where competition may not be sufficient,'' such as in the
creation of a ``consolidated transactional reporting system.'' \30\
---------------------------------------------------------------------------
\30\ NetCoalition v. SEC, 615 F.3d 525, 535 (D.C. Cir. 2010)
(``NetCoalition I'') (quoting H.R. Rep. No. 94-229 at 92 (1975), as
reprinted in 1975 U.S.C.C.A.N. 323).
The court agreed with the Commission's conclusion that ``Congress
intended that `competitive forces should dictate the services and
practices that constitute the U.S. national market system for trading
equity securities.' '' \31\
---------------------------------------------------------------------------
\31\ Id. at 535.
---------------------------------------------------------------------------
1. The Proposed Fees Are Constrained by Significant Competitive Forces
a. Exchange Market Data Is Sold in a Competitive Market
In 2018, Charles M. Jones, the Robert W. Lear of Professor of
Finance and Economics of the Columbia University School of Business,
conducted an analysis of the market for equity market data in the
United States. He canvassed the demand for both consolidated and
exchange proprietary market data products and the uses to which those
products were put by market participants, and reported his conclusions
in a paper annexed hereto.\32\ Among other things, Professor Jones
concluded that:
---------------------------------------------------------------------------
\32\ See Exhibit 3A, Charles M. Jones, Understanding the Market
for U.S. Equity Market Data, August 31, 2018 (hereinafter ``Jones
Paper'').
---------------------------------------------------------------------------
[[Page 71509]]
``The market [for exchange market data] is characterized
by robust competition: exchanges compete with each other in selling
proprietary market data products. They also compete with consolidated
data feeds and with data provided by alternative trading systems
(`ATSs'). Barriers to entry are very low, so existing exchanges must
also take into account competition from new entrants, who generally try
to build market share by offering their proprietary market data
products for free for some period of time.'' \33\
---------------------------------------------------------------------------
\33\ Jones Paper at 2.
---------------------------------------------------------------------------
``Although there are regulatory requirements for some
market participants to use consolidated data products, there is no
requirement for market participants to purchase any proprietary market
data product for regulatory purposes.'' \34\
---------------------------------------------------------------------------
\34\ Id.
---------------------------------------------------------------------------
``There are a variety of data products, and consumers of
equity market data choose among them based on their needs. Like most
producers, exchanges offer a variety of market data products at
different price levels. Advanced proprietary market data products
provide greater value to those who subscribe. As in any other market,
each potential subscriber takes the features and prices of available
products into account in choosing what market data products to buy
based on its business model.'' \35\
---------------------------------------------------------------------------
\35\ Id.
---------------------------------------------------------------------------
``Exchange equity market data fees are a small cost for
the industry overall: the data demonstrates that total exchange market
data revenues are orders of magnitude smaller than (i) broker-dealer
commissions, (ii) investment bank earnings from equity trading, and
(iii) revenues earned by third-party vendors.'' \36\
---------------------------------------------------------------------------
\36\ Id.
---------------------------------------------------------------------------
``For proprietary exchange data feeds, the main question
is whether there is a competitive market for proprietary market data.
More than 40 active exchanges and alternative trading systems compete
vigorously in both the market for order flow and in the market for
market data. The two are closely linked: an exchange needs to consider
the negative impact on its order flow if it raises the price of its
market data. Furthermore, new entrants have been frequent over the past
10 years or so, and these venues often give market data away for free,
serving as a check on pricing by more established exchanges. These are
all the standard hallmarks of a competitive market.'' \37\
---------------------------------------------------------------------------
\37\ Id. at 39-40.
---------------------------------------------------------------------------
Professor Jones' conclusions are consistent with the demonstration
of the competitive constraints on the pricing of market data
demonstrated by analysis of exchanges as platforms for market data and
trading services, as shown below.
b. Exchanges That Offer Market Data and Trading Services Function as
Two-Sided Platforms
An exchange may demonstrate that its fees are constrained by
competitive forces by showing that the platform theory of competition
applies.
As the United States Supreme Court recognized in Ohio v. American
Express, platforms are firms that act as intermediaries between two or
more sets of agents, and typically the choices made on one side of the
platform affect the results on the other side of the platform via
externalities, or ``indirect network effects.'' \38\ Externalities are
linkages between the different ``sides'' of a platform such that one
cannot understand pricing and competition for goods or services on one
side of the platform in isolation; one must also account for the
influence of the other side. As the Supreme Court explained:
---------------------------------------------------------------------------
\38\ Ohio v. American Express, 138 S. Ct. 2274, 2280-81 (2018).
To ensure sufficient participation, two-sided platforms must be
sensitive to the prices that they charge each side. . . . Raising
the price on side A risks losing participation on that side, which
decreases the value of the platform to side B. If the participants
on side B leave due to this loss in value, then the platform has
even less value to side A--risking a feedback loop of declining
demand. . . . Two-sided platforms therefore must take these indirect
network effects into account before making a change in price on
either side.\39\
---------------------------------------------------------------------------
\39\ Id. at 2281.
The Exchange and its affiliated exchanges have long maintained that
they function as platforms between consumers of market data and
consumers of trading services. Proving the existence of linkages
between the two sides of this platform requires an in-depth economic
analysis of both public data and confidential Exchange data about
particular customers' trading activities and market data purchases.
Exchanges, however, are prohibited from sharing details about these
specific customer activities and purchases. For example, pursuant to
Exchange Rule 7.41, transactions executed on the Exchange are processed
anonymously.
The Exchange and its affiliated exchanges have retained a third
party expert, Marc Rysman, Professor of Economics Boston University, to
analyze how platform economics applies to stock exchanges' sale of
market data products and trading services, and to explain how this
affects the assessment of competitive forces affecting the exchanges'
data fees.\40\ Professor Rysman was able to analyze exchange data that
is not otherwise publicly available in a manner that is consistent with
the exchanges' confidentiality obligations to customers. As shown in
his paper, Professor Rysman surveyed the existing economic literature
analyzing stock exchanges as platforms between market data and trading
activities, and explained the types of linkages between market data
access and trading activities that must be present for an exchange to
function as a platform. In addition, Professor Rysman undertook an
empirical analysis of customers' trading activities within the NYSE
group of exchanges in reaction to NYSE's introduction in 2015 of the
NYSE Integrated Feed, a full order-by-order depth of book data
product.\41\
---------------------------------------------------------------------------
\40\ See Exhibit 3B, Marc Rysman, Stock Exchanges as Platforms
for Data and Trading, December 2, 2019 (hereinafter ``Rysman
Paper''), ] 7.
\41\ See Securities Exchange Act Release Nos. 74128 (January 23,
2015), 80 FR 4951 (January 29, 2015) (SR-NYSE-2015-03) (Notice of
filing and immediate effectiveness of proposed rule change to
establish NYSE Integrated Feed) and 76485 (November 20, 2015), 80 FR
74158 (November 27, 2015) (SR-NYSE-2015-57) (Notice of filing and
immediate effectiveness of proposed rule change to establish fees
for the NYSE Integrated Feed).
---------------------------------------------------------------------------
Professor Rysman's analysis of this confidential firm-level data
shows that firms that purchased the NYSE Integrated Feed market data
product after its introduction were more likely to route orders to NYSE
as opposed to one of the other NYSE-affiliated exchanges, such as NYSE
Arca or NYSE American.\42\ Moreover, Professor Rysman shows that the
same is true for firms that did not subscribe to the NYSE Integrated
Feed: The introduction of the NYSE Integrated Feed led to more trading
on NYSE (as opposed to other NYSE-affiliated exchanges) by firms that
did not subscribe to the NYSE Integrated Feed.\43\ This is the sort of
externality that is a key characteristic of a platform market.\44\
---------------------------------------------------------------------------
\42\ Rysman Paper ]] 79-89.
\43\ Id. ]] 90-91.
\44\ Id. ] 90.
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From this empirical evidence, Professor Rysman concludes:
``[D]ata is more valuable when it reflects more trading
activity and more liquidity-providing orders. These linkages alone are
enough to make platform economics necessary for understanding the
pricing of market data.'' \45\
---------------------------------------------------------------------------
\45\ Id. ] 95.
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[[Page 71510]]
``[L]inkages running in the opposite direction, from data
to trading, are also very likely to exist. This is because market data
from an exchange reduces uncertainty about the likelihood, price, or
timing of execution for an order on that exchange. This reduction in
uncertainty makes trading on that exchange more attractive for traders
that subscribe to that exchange's market data. Increased trading by
data subscribers, in turn, makes trading on the exchange in question
more attractive for traders that do not subscribe to the exchange's
market data.'' \46\
---------------------------------------------------------------------------
\46\ Id. ] 96.
---------------------------------------------------------------------------
The ``mechanisms by which market data makes trading on an
exchange more attractive for subscribers to market data . . . apply to
a wide assortment of market data products, including BBO, order book,
and full order-by-order depth of book data products at all exchanges.''
\47\
---------------------------------------------------------------------------
\47\ Id.
---------------------------------------------------------------------------
``[E]mpirical evidence confirms that stock exchanges are
platforms for data and trading.'' \48\
---------------------------------------------------------------------------
\48\ Id. ] 97.
---------------------------------------------------------------------------
``The platform nature of stock exchanges means that data
fees cannot be analyzed in isolation, without accounting for the
competitive dynamics in trading services.'' \49\
---------------------------------------------------------------------------
\49\ Id. ] 98.
---------------------------------------------------------------------------
``Competition is properly understood as being between
platforms (i.e., stock exchanges) that balance the needs of consumers
of data and traders.'' \50\
---------------------------------------------------------------------------
\50\ Id.
---------------------------------------------------------------------------
``Data fees, data use, trading fees, and order flow are
all interrelated.'' \51\
---------------------------------------------------------------------------
\51\ Id.
---------------------------------------------------------------------------
``Competition for order flow can discipline the pricing of
market data, and vice-versa.'' \52\
---------------------------------------------------------------------------
\52\ Id.
---------------------------------------------------------------------------
``As with platforms generally, overall competition between
exchanges will limit their overall profitability, not margins on any
particular side of the platform.'' \53\
---------------------------------------------------------------------------
\53\ Id. ] 100.
---------------------------------------------------------------------------
c. Exchange Market Data Fees Are Constrained by the Availability of
Substitute Platforms
Professor Rysman's conclusions that exchanges function as platforms
for market data and transaction services mean that exchanges do not set
fees for market data products without considering, and being
constrained by, the effect the fees will have on the order-flow side of
the platform. And as the D.C. Circuit recognized in NetCoalition I,
``[n]o one disputes that competition for order flow is fierce.'' \54\
The court further noted that ``no exchange possesses a monopoly,
regulatory or otherwise, in the execution of order flow from broker
dealers,'' and that an exchange ``must compete vigorously for order
flow to maintain its share of trading volume.'' \55\
---------------------------------------------------------------------------
\54\ NetCoalition I, 615 F.3d at 544 (internal quotation
omitted).
\55\ Id.
---------------------------------------------------------------------------
Similarly, the Commission itself has recognized that the market for
trading services in NMS stocks has become ``more fragmented and
competitive.'' \56\ The Commission's Division of Trading and Markets
has also recognized that with so many ``operating equities exchanges
and dozens of ATSs, there is vigorous price competition among the U.S.
equity markets and, as a result, [transaction] fees are tailored and
frequently modified to attract particular types of order flow, some of
which is highly fluid and price sensitive.'' \57\ Indeed, today, equity
trading is currently dispersed across 13 exchanges,\58\ 31 alternative
trading systems,\59\ and numerous broker-dealer internalizers and
wholesalers, all competing for order flow. Based on publicly-available
information, no single exchange currently has more than 18% market
share.\60\
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\56\ See Securities Exchange Act Release No. 51808, 84 FR 5202,
5253 (February 20, 2019) (File No. S7-05-18).
\57\ Commission Division of Trading and Markets, Memorandum to
EMSAC, dated October 20, 2015, available here: https://www.sec.gov/spotlight/emsac/memo-maker-taker-fees-on-equities-exchanges.pdf.
\58\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, available at https://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
\59\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of
alternative trading systems registered with the Commission is
available at https://www.sec.gov/foia/docs/atslist.htm.
\60\ See Cboe Global Markets U.S. Equities Market Volume
Summary, available at https://markets.cboe.com/us/equities/market_share/.
---------------------------------------------------------------------------
Further, low barriers to entry mean that new exchanges may rapidly
and inexpensively enter the market and offer additional substitute
platforms to compete with the Exchange.\61\ In addition to the 13
presently-existing exchanges, three new ones are expected to enter the
market in 2020: Long Term Stock Exchange (LTSE), which has been
approved as an equities exchange but is not yet operational; \62\
Members Exchange (MEMX), which has recently filed its application to be
approved as a registered equities exchange; \63\ and Miami
International Holdings (MIAX), which has announced its plan to
introduce equities trading on an existing registered options
exchange.\64\
---------------------------------------------------------------------------
\61\ See Jones Paper at 10-11.
\62\ See Securities Exchange Act Release No. 85828 (May 10,
2019) (File No. 10-234) (Findings, Opinion, and Order of the
Commission in the Matter of the Application of Long Term Stock
Exchange, Inc. for Registration as a National Securities Exchange).
\63\ See Securities Exchange Act Release No. 87436 (October 31,
2019) (File No. 10-237) (Notice of filing of application of MEMX LLC
for registration as a national securities exchange under Section 6
of the Act).
\64\ See Press Release of Miami International Holdings Inc.,
dated May 17, 2019, available here: https://www.miaxoptions.com/sites/default/files/press_release-files/MIAX_Press_Release_05172019.pdf.
---------------------------------------------------------------------------
Given Professor Rysman's conclusion that exchanges are platforms
for market data and trading, this fierce competition for order flow on
the trading side of the platform acts to constrain, or ``discipline,''
the pricing of market data on the other side of the platform.\65\ And
due to the ready availability of substitutes and the low cost to move
order flow to those substitute trading venues, an exchange setting
market data fees that are not at competitive levels would expect to
quickly lose business to alternative platforms with more attractive
pricing.\66\ Although the various exchanges may differ in their
strategies for pricing their market data products and their transaction
fees for trades--with some offering market data for free along with
higher trading costs, and others charging more for market data and
comparatively less for trading--the fact that exchanges are platforms
ensures that no exchange makes pricing decisions for one side of its
platform without considering, and being constrained by, the effects
that price will have on the other side of the platform.
---------------------------------------------------------------------------
\65\ Rysman Paper ] 98.
\66\ See Jones Paper at 11.
---------------------------------------------------------------------------
In sum, the fierce competition for order flow thus constrains any
exchange from pricing its market data at a supracompetitive price, and
constrains the Exchange in setting its fees at issue here.
The proposed fees are therefore reasonable because in setting them,
the Exchange is constrained by the availability of numerous substitute
platforms offering market data products and trading. Such substitutes
need not be identical, but only substantially similar to the product at
hand.
More specifically, in reducing specified fees for the NYSE BBO and
NYSE Trades market data products, the Exchange is constrained by the
fact that, if its pricing across the platform is unattractive to
customers, customers
[[Page 71511]]
have their pick of an increasing number of alternative platforms to use
instead of the Exchange. The Exchange believes that it has considered
all relevant factors and has not considered irrelevant factors in order
to establish reasonable fees. The existence of numerous alternative
platforms to the Exchange's platform ensures that the Exchange cannot
set unreasonable market data fees without suffering the negative
effects of that decision in the fiercely competitive market for trading
order flow.
d. The Availability of Substitute Market Data Products Constrains Fees
for NYSE BBO, NYSE Trades, and NYSE BQT
Even putting aside the facts that exchanges are platforms and that
pricing decisions on the two sides of the platform are intertwined, the
Exchange is constrained in setting the proposed market data fees by the
availability of numerous substitute market data products.
The Exchange's NYSE BQT market data product is subject to
significant competitive forces that constrain its pricing.
Specifically, as described above, NYSE BQT competes head-to-head with
the Nasdaq Basic product and the Cboe One Feed. These products each
serve as reasonable substitutes for one another as they are each
designed to provide investors with a unified view of real-time quotes
and last-sale prices in all Tape A, B, and C securities. Each product
provides subscribers with consolidated top-of-book quotes and trades
from multiple U.S. equities markets. In the case of NYSE BQT, this
product provides top-of-book quotes and trades data from five NYSE-
affiliated U.S. equities exchanges, which together account for
approximately 24% of consolidated U.S. equities trading volume as of
October 2019.\67\ Cboe One Feed similarly provides top-of-book quotes
and trades data from Cboe's four U.S. equities exchanges. NYSE BQT,
Nasdaq Basic, and Cboe One Feed are all intended to provide indicative
pricing and are not intended to be used for order routing or trading
decisions.
---------------------------------------------------------------------------
\67\ See Cboe Global Markets U.S. Equities Market Volume
Summary, available at https://markets.cboe.com/us/equities/market_share/market/2019-10-31/.
---------------------------------------------------------------------------
In addition to competing with proprietary data products from Nasdaq
and Cboe, NYSE BQT also competes with the consolidated data feed.
However, the Exchange does not claim that NYSE BQT is a substitute for
consolidated data with respect to requirements under the Vendor Display
Rule, which is Regulation NMS Rule 603(c).
The fact that this filing is proposing reductions in certain fees,
fee credits, and free trial periods is itself confirmation of the
inherently competitive nature of the market for the sale of proprietary
market data. For example, Cboe recently filed proposed rule changes to
reduce certain of its Cboe One Feed fees and noted that it attracted
two additional customers because of the reduced fees.\68\
---------------------------------------------------------------------------
\68\ See Securities Exchange Act Release Nos. 86667 (August 14,
2019) (SR-CboeBZX-2019-069); 86670 (August 14, 2019) (SR-CboeBYX-
2019-012); 86676 (August 14, 2019) (SR-CboeEDGA-2019-013); and 86678
(August 14, 2019) (SR-CboeEDGX-2019-048) (Notices of filing and
Immediate effectiveness of proposed rule change to reduce fees for
the Cboe One Feed) (collectively ``Cboe One Fee Filings''). The Cboe
One Fee Filings were in effect from August 1, 2019 until September
30, 2019, when the Commission suspended them and instituted
proceedings to determine whether to approve or disapprove those
proposals. See, e.g., Securities Exchange Act Release No. 87164
(September 30, 2019), 84 FR 53208 (October 4, 2019) (SR-CboeBZX-
2019-069). On October 1, 2019, the Cboe equities exchanges refiled
the Cboe One Fee Filings on the basis that they had new customers
subscribe as a result of the Cboe One Fee Filings, and therefore its
fee proposal had increased competition for top-of-book market data.
See Securities Exchange Act Release Nos. 87312 (October 15, 2019),
84 FR 56235 (October 21, 2019) (SR-CboeBZX-2019-086); 87305 (October
14, 2019), 84 FR 56210 (October 21, 2019) (SR-CboeBYX-2019-015);
87295 (October 11, 2019), 84 FR 55624 (October 17, 2019) (SR-
CboeEDGX-2019-059); and 87294 (October 11, 2019), 84 FR 55638
(October 17, 2019) (SR-CboeEDGZ-2019-015) (Notices of filing and
immediate effectiveness of proposed rule changes to re-file the
Small Retail Broker Distribution Program) (``Cboe One Fee Re-
Filings''). On November 26, 2019, the Commission suspended the Cboe
One Fee Re-Filings and instituted proceedings to determine whether
to approve or disapprove those proposals. See, e.g., Securities
Exchange Act Release No. 87629 (November 26, 2019) (SR-CboeBZX-2019-
086) (Federal Register publication pending).
---------------------------------------------------------------------------
The Exchange notes that NYSE BBO, NYSE Trades, and NYSE BQT are
entirely optional. The Exchange is not required to make the proprietary
data products that are the subject of this proposed rule change
available or to offer any specific pricing alternatives to any
customers, nor is any firm or investor required to purchase the
Exchange's data products. Unlike some other data products (e.g., the
consolidated quotation and last-sale information feeds) that firms are
required to purchase in order to fulfil regulatory obligations,\69\ a
customer's decision whether to purchase any of the Exchange's
proprietary market data feeds is entirely discretionary. Most firms
that choose to subscribe to the NYSE's proprietary market data feeds do
so for the primary goals of using them to increase their revenues,
reduce their expenses, and in some instances compete directly with the
Exchange's trading services. Such firms are able to determine for
themselves whether or not the products in question or any other similar
products are attractively priced. If the NYSE market data feeds do not
provide sufficient value to firms based on the uses those firms may
have for it, such firms may simply choose to conduct their business
operations in ways that do not use the products.\70\ A clear
illustration of this point is the fact that today, NYSE BQT has just
one subscriber.
---------------------------------------------------------------------------
\69\ The Exchange notes that broker-dealers are not required to
purchase proprietary market data to comply with their best execution
obligations. See In the Matter of the Application of Securities
Industry and Financial Markets Association for Review of Actions
Taken by Self-Regulatory Organizations, Release Nos. 34-72182; AP-3-
15350; AP-3-15351 (May 16, 2014). Similarly, there is no requirement
in Regulation NMS or any other rule that proprietary data be
utilized for order routing decisions, and some broker-dealers and
ATSs have chosen not to do so.
\70\ See generally Jones Paper at 8, 10-11.
---------------------------------------------------------------------------
In addition, in the case of products that are also redistributed
through market data vendors, such as Bloomberg and Refinitiv, 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.
Currently, only one vendor subscribes to NYSE BQT, and that vendor has
limited redistribution of NYSE BQT. No other vendors currently
subscribe to NYSE BQT and likely will not unless their customers
request it, and customers will not elect to pay the proposed fees
unless such 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.
Because of the availability of substitutes, an exchange that
overprices its market data products stands a high risk that users may
substitute another source of market data information for its own. Those
competitive pressures imposed by available alternatives are evident in
the Exchange's proposed pricing.
In setting 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
[[Page 71512]]
all relevant factors and has not considered irrelevant factors in order
to establish reasonable fees. The existence of numerous alternatives to
the Exchange's platform and, more specifically, alternatives to the
market data products, including proprietary data from other sources,
ensures that the Exchange cannot set unreasonable fees when vendors and
subscribers can elect these alternatives or choose not to purchase a
specific proprietary data product if the attendant fees are not
justified by the returns that any particular vendor or data recipient
would achieve through the purchase.
2. The Proposed Fees Are Reasonable
The specific fees that the Exchange proposes for NYSE Trades and
NYSE BBO are reasonable, for the following additional reasons.
Overall. This proposed fee change is a result of the competitive
environment, as the Exchange seeks to decrease certain of its fees to
attract subscribers that do not currently use the NYSE BQT market data
product. The Exchange is proposing the fee reductions at issue to make
the Exchange's fees more competitive for a specific segment of market
participants, thereby increasing the availability of the Exchange's
data products, and expanding the options available to firms making data
purchasing decisions based on their business needs. The Exchange
believes that this is consistent with the principles contained in
Regulation NMS to ``promote the wide availability of market data and to
allocate revenues to SROs that produce the most useful data for
investors.'' \71\
---------------------------------------------------------------------------
\71\ See Regulation NMS Adopting Release, 70 FR 37495, at 37503.
---------------------------------------------------------------------------
Amendment to Footnote 5: The Exchange believes that the proposed
amendment to footnote 5 of the Fee Schedule is reasonable because it
does not impose any new or different fees for subscribers of NYSE BQT,
but rather, clarifies the Fee Schedule to reduce the administrative
burden for such subscribers. The proposed rule change is similar to how
Nasdaq charges for its Nasdaq Last Sale Plus product because firms that
receive that product must also pay the monthly administrative fees for
underlying data products, but the Nasdaq rules do not require that
Nasdaq Last Sale Plus customers also subscribe to those underlying
feeds.\72\
---------------------------------------------------------------------------
\72\ See Section 138(e)(1) [sic] of the Nasdaq Equity 7 Pricing
Schedule.
---------------------------------------------------------------------------
Access Fee. By adopting a reduced access fee to access U.S. equity
market data that is used in display-only format and that serves as the
foundation of NYSE BQT, the Exchange believes that more data recipients
may choose to subscribe to these products, thereby expanding the
distribution of this market data for the benefit of investors that
participate in the national market system and increasing competition
generally. In addition, the proposed reduced access fee is reasonable
when compared to similar fees for comparable products offered by other
markets. For example, NYSE Trades provides investors with alternative
market data and is similar to the Nasdaq Last Sale Data Feed; Nasdaq
charges redistributors a monthly fee of $1,500 per month, which is the
same as the current access fee for NYSE Trades, and higher than the
proposed access fee for display-only users.\73\ The Exchange also
believes that offering a reduced access fee for display-only use
expands the range of options for offering the Exchange's market data
products and would allow data recipients greater choice in selecting
the most appropriate level of data and fees for the Professional and
Non-Professional Users they service.
---------------------------------------------------------------------------
\73\ See Section 139(d) of the Nasdaq Equity 7 Pricing Schedule.
---------------------------------------------------------------------------
The Exchange determined to charge the $100 access fee for its
proposed Per User Access Fee because it constitutes a substantial
reduction of the current fee, with the intended purpose of increasing
use of NYSE BQT. NYSE BQT has been in place since 2014 but has only one
subscriber, which itself has limited distribution of the product. The
Exchange believes that in order to compete with other indicative
pricing products such as Nasdaq Basic and Cboe One Feed, it needs to
provide a meaningful financial incentive for data recipients to
subscribe to NYSE BQT. Accordingly, the proposed reduction to the
Access Fees for NYSE Trades and NYSE BBO, together with the proposed
reduction to the Access Fees for NYSE American BBO, NYSE American
Trades, NYSE Arca BBO, and NYSE Arca Trades, is reasonable because the
reductions will make NYSE BQT a more attractive offering for data
recipients and make it more competitive with Nasdaq Basic and Cboe One
Feed. For example, the External Distribution Fee for Cboe One Feed is
currently $5,000 (which is the sum of the External Distribution fees
for the four exchange data products that are included in Cboe One Feed)
plus a Data Consolidation Fee of $1,000, for a total of $6,000.
Evidence of the competition among exchange groups for these products
has previously been demonstrated via fee changes. For example,
following the introduction of the Cboe One Feed, Nasdaq responded by
reducing its fees for the Nasdaq Basic product.\74\ With the proposed
changes by the Exchange, NYSE, and NYSE Arca, the Exchange is similarly
seeking to compete by decreasing the total access fees for NYSE BQT
from $6,250 to $850. This proposed rule change therefore demonstrates
the existence of an effective, competitive market because this proposal
resulted from a need to generate innovative approaches in response to
competition from other exchanges that offer market data for a specific
segment of market participants.
---------------------------------------------------------------------------
\74\ See e.g. Securities Exchange Act Release No. 83751 (July
31, 2018), 83 FR 38428 (August 6, 2018) (SR-NASDAQ-2018-058) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To
Lower Fees and Administrative Costs for Distributors of Nasdaq
Basic, Nasdaq Last Sale, NLS Plus and the Nasdaq Depth-of-Book
Products Through a Consolidated Enterprise License). Nasdaq filed
the proposed fee change to lower the Enterprise Fee for Nasdaq Basic
and other market data products in response to the Enterprise Fee for
the Cboe One Feed adopted by Cboe family of exchanges.
---------------------------------------------------------------------------
Redistribution Fees. Similarly, the proposed reduction to the NYSE
Trades Redistribution Fee is reasonable because it is designed to
provide an incentive for Redistributors to make NYSE BQT available so
that data recipients can subscribe to NYSE BQT. The Exchange further
believes that the proposed reduction to the NYSE Trades Redistribution
Fee is reasonable because it is designed to compete with a similar
credit offered by the Cboe family of equity exchanges.\75\
---------------------------------------------------------------------------
\75\ See, e.g., BZX Price List--U.S. Equities available at
https://www.nasdaqtrader.com/Trader.aspx?id=DPUSdata#db [sic]. BZX
charges $500 per month for internal distribution, and $2,500 per
month for external distribution, of BZX Last Sale. BZX also charges
$500 per month for internal distribution, and $2,500 per month for
external distribution, of BZX Top. Each external distributor is
eligible to receive a credit against its monthly Distributor Fee for
BZX Las [sic] Sale equal to the amount of its monthly User Fees up
to a maximum of the Distributor Fee for BZX Las [sic] Sale. See Cboe
BZX U.S. Equities Exchange Fee Schedule at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------
One-Month Free Trial. The Exchange believes that the proposed rule
change to provide the NYSE market data products to new customers free-
of-charge for their first subscription month is reasonable because it
would allow vendors and subscribers to become familiar with the feeds
and determine whether they suit their needs without incurring fees.
Making a new market data product available for free for a trial period
is consistent with offerings of other exchanges. For example, Nasdaq
offers new subscribers its market data products a 30-day waiver of user
fees.\76\
---------------------------------------------------------------------------
\76\ See Section 112(b)(1) of Nasdaq's Equity 7 Pricing
Schedule.
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[[Page 71513]]
Deletion of Obsolete Text. The Exchange believes that it is
reasonable to delete references to obsolete rule text and dates from
the Fee Schedule and to make non-substantive clarifying amendments. The
Exchange believes that the proposed changes are reasonable because they
would result in greater specificity and precision within the Fee
Schedule, which would contribute to reasonably ensuring that the fees
described there are clear and accurate. Specifically, the proposed
changes are reasonable because they would remove obsolete rule text and
dates from the Fee Schedule related to a Decommission Extension Fee
that is no longer charged by the Exchange and provide greater
specificity regarding the application of the Enterprise Fee.
For all of the foregoing reasons, the Exchange believes that the
proposed fees are reasonable.
The Proposed Fees Are Equitably Allocated
The Exchange believes the proposed fees for NYSE Trades and NYSE
BBO are allocated fairly and equitably among the various categories of
users of the feed, and any differences among categories of users are
justified.
Overall. As noted above, this proposed fee change is a result of
the competitive environment for market data products that provide
indicative pricing information across a family of exchanges. To respond
to this competitive environment, the Exchange seeks to amend its fees
to access NYSE Trades and NYSE BBO in a display-only format, which the
Exchange hopes will attract additional subscribers for its NYSE BQT
market data product. The Exchange is proposing the fee reductions to
make the Exchange's fees more competitive for a specific segment of
market participants, thereby increasing the availability of the
Exchange's data products, expanding the options available to firms
making data purchasing decisions based on their business needs, and
generally increasing competition.
Amendment to Footnote 5: The Exchange believes that the proposed
amendment to footnote 5 of the Fee Schedule is equitably allocated. The
proposed change does not impose any new or different fees for
subscribers of NYSE BQT, but rather, clarifies the Fee Schedule to
reduce the administrative burden for all subscribers of the NYSE BQT
product.
Access Fee. The Exchange believes that the proposed Per User Access
Fee is equitable as it would apply equally to all data recipients that
choose to subscribe to NYSE Trades or NYSE BBO in a display-only
format. Because NYSE BBO and NYSE Trades are optional products, any
data recipient could choose to subscribe to NYSE BBO or NYSE Trades for
display-only use and be eligible for the proposed reduced fee. The
Exchange does not believe that it is inequitable that this proposed fee
reduction would be available only to data recipients that use NYSE
Trades or NYSE BBO in a display-only format. Non-display data
represents a different set of use cases than display-only usage; non-
display data can be used by data recipients for a wide variety of
profit-generating purposes, including proprietary and agency trading
and smart order routing, as well as by data recipients that operate
order matching and execution platforms that compete directly with the
Exchange for order flow. The data also can be used for a variety of
non-trading purposes that indirectly support trading, such as risk
management and compliance. Although some of these non-trading uses do
not directly generate revenues, they can nonetheless substantially
reduce the recipient's costs by automating such functions so that they
can be carried out in a more efficient and accurate manner and reduce
errors and labor costs, thereby benefiting end users. The Exchange
believes that charging a different access fee for non-display use is
equitable because data recipients can derive substantial value from
such uses, for example, by automating tasks so that can be performed
more quickly and accurately and less expensively than if they were
performed manually.
Redistribution Fees. The Exchange believes the proposed change to
provide a credit to a Redistributor that externally redistributes NYSE
Trades to Professional and Non-Professional Users in a display-only
format in an amount equal to the monthly Professional User and Non-
Professional User fees for such external distribution, up to a maximum
of the Redistribution Fee, is equitably allocated. The proposed change
would apply equally to all Redistributors that choose to externally
redistribute the NYSE Trades product, and would serve as an incentive
for Redistributors to make NYSE Trades more broadly available for use
by both Professional and Non-Professional Users. This, in turn, could
provide an incentive for Redistributors to make NYSE BQT available to
their customers.
One-Month Free Trial. The Exchange believes the proposal to provide
the NYSE market data products to new customers free-of-charge for their
first subscription month is equitable because it applies to any first-
time subscriber, regardless of the use they plan to make of the feed.
As proposed, any first-time subscriber would not be charged the Access
Fee, Non-Display Fee, any applicable Professional and Non-Professional
User Fee, or Redistribution Fee for any of the NYSE market data
products for one calendar month. The Exchange believes it is equitable
to restrict the availability of this one-month free trial to customers
that have not previously subscribed to any NYSE market data product,
since customers who are current or previous subscribers are already
familiar with the products and whether they would suits their needs.
Deletion of Obsolete Text. The Exchange believes that deleting
obsolete rule text and dates from the Fee Schedule and make non-
substantive clarifying amendments is equitably allocated because these
proposed changes do not change fees, but rather, result in greater
specificity and precision within the Fee Schedule, which would
contribute to reasonably ensuring that the fees described there are
clear and accurate. The Exchange also believes that the proposed
changes are equitable because all readers of the Fee Schedule would
benefit from the increased specificity and clarity that this proposed
rule change would provide.
For all of the foregoing reasons, the Exchange believes that the
proposed fees for the NYSE market data products are equitably
allocated.
The Proposed Fees Are Not Unfairly Discriminatory
The Exchange believes the proposed fees are not unfairly
discriminatory because any differences in the application of the fees
are based on meaningful distinctions between customers, and those
meaningful distinctions are not unfairly discriminatory between
customers.
Overall. As noted above, this proposed fee change is a result of
the competitive environment for market data products that provide
indicative pricing information across a family of exchanges. To respond
to this competitive environment, the Exchange seeks to amend its fees
to access NYSE Trades and NYSE BBO in a display-only format, which the
Exchange hopes will attract more subscribers for its NYSE BQT market
data product. The Exchange is proposing the fee reductions to make the
Exchange's fees more competitive for a specific segment of market
participants, thereby increasing the availability of the Exchange's
data products, expanding the options available to firms making data
purchasing decisions based on their
[[Page 71514]]
business needs, and generally increasing competition.
Amendment to Footnote 5: The Exchange believes that the proposed
amendment to footnote 5 of the Fee Schedule is not unfairly
discriminatory. The proposed change does not impose any new or
different fees for any subscribers of NYSE BQT, but rather, clarifies
the Fee Schedule to reduce the administrative burden for all
subscribers of the NYSE BQT product.
Access Fee. The Exchange believes that the proposed Per User Access
Fee is not unfairly discriminatory as it would apply equally to all
data recipients that choose to subscribe to NYSE Trades or NYSE BBO in
a display-only format. Because NYSE BBO and NYSE Trades are optional
products, any data recipient could choose to subscribe to NYSE BBO or
NYSE Trades for display-only use and be eligible for the proposed
reduced fee. The Exchange does not believe that it is unfairly
discriminatory that this proposed fee reduction would be available only
to data recipients that use NYSE Trades or NYSE BBO in a display-only
format. Non-display data can be used by data recipients for a wide
variety of profit-generating purposes, including proprietary and agency
trading and smart order routing, as well as by data recipients that
operate order matching and execution platforms that compete directly
with the Exchange for order flow. The data also can be used for a
variety of non-trading purposes that indirectly support trading, such
as risk management and compliance. While some of these non-trading uses
do not directly generate revenues, they can nonetheless substantially
reduce the recipient's costs by automating such functions so that they
can be carried out in a more efficient and accurate manner and reduce
errors and labor costs, thereby benefiting end users. The Exchange
therefore believes that there is a meaningful distinction between
display and non-display users of market data and that charging a
different access fee for non-display use is not unfairly discriminatory
because data recipients can derive substantial value from such non-
display uses, for example, by automating tasks so that can be performed
more quickly and accurately and less expensively than if they were
performed manually.
Redistribution Fees. The Exchange believes the proposed change to
provide a credit to a Redistributor that externally redistributes NYSE
Trades to Professional and Non-Professional Users in a display-only
format in an amount equal to the monthly Professional User and Non-
Professional User fees for such external distribution, up to a maximum
of the Redistribution Fee, is not unfairly discriminatory. The proposed
credit would apply equally to all Redistributors that choose to
externally redistribute the NYSE Trades product for display use, and
would serve as an incentive for Redistributors to make NYSE Trades more
broadly available for use by both Professional and Non-Professional
Users. This, in turn, could provide an incentive for Redistributors to
make NYSE BQT available to their customers.
The Exchange believes that there is a meaningful distinction
between vendors that distribute market data in a display-only format,
as such vendors are more likely to service the non-professional
community, and vendors that distribute market data for non-display use
only, as users of non-display data are more likely to be professionals
that derive substantial value from such non-display uses. While this
credit is not available to vendors that redistribute NYSE Trades for
non-display use only, such vendors would be eligible for this credit if
they choose to expand their distribution of NYSE Trades for display
use. NYSE BQT is targeted for display use and the Exchange believes
that the proposed credit would increase the number of Redistributors--
whether current vendors that redistribute on a non-display only basis
or new vendors--that would make NYSE BQT available to their customers.
One-Month Free Trial. The Exchange believes that the proposed rule
change providing for a one-month free trial period to test is not
unfairly discriminatory because the financial benefit of the fee waiver
would be available to all firms subscribing to a NYSE market data
product for the first time on a free-trial basis. The Exchange believes
there is a meaningful distinction between customers that are
subscribing to a market data for the first time, who may benefit from a
period within which to set up and test use of the product before it
becomes fee liable, and users that are already receiving the Exchange's
market data products and are deriving value from such use. The Exchange
believes that the limited period of the free trial would not be
unfairly discriminatory to other users of the Exchange's market data
products because it is designed to provide a reasonable period of time
to set up and test a new market data product. The Exchange further
believes that providing a free trial for a calendar month would ease
administrative burdens for data recipients to subscribe to a new data
product and eliminate fees for a period before such users are able to
derive any benefit from the data.
Deletion of Obsolete Text. The Exchange believes that deleting
obsolete rule text and dates from the Fee Schedule and make non-
substantive clarifying amendments is not unfairly discriminatory
because these proposed changes do not change fees, but rather, result
in greater specificity and precision within the Fee Schedule, which
would contribute to reasonably ensuring that the fees described there
are clear and accurate. The Exchange also believes that the proposed
changes are not unfairly discriminatory because all readers of the Fee
Schedule would benefit from the increased specificity and clarity that
this proposed rule change would provide.
For all of the foregoing reasons, the Exchange believes that the
proposed fees are not unfairly discriminatory.
B. Self-Regulatory Organization's Statement on Burden on Competition
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.
Intramarket Competition. The Exchange believes that the proposed
fees do not put any market participants at a relative disadvantage
compared to other market participants. As noted above, the proposed fee
schedule would apply to all subscribers of NYSE market data products,
and customers may not only choose whether to subscribe to the products
at all, but also may tailor their subscriptions to include only the
products and uses that they deem suitable for their business needs.
The Exchange also believes that the proposed fees neither favor nor
penalize one or more categories of market participants in a manner that
would impose an undue market on competition. As shown above, to the
extent that particular proposed fees apply to only a subset of
subscribers, those distinctions are not unfairly discriminatory and do
unfairly burden one set of customers over another. To the contrary, by
tailoring the proposed fees in this manner, the Exchange believes that
it has eliminated the potential burden on competition that might
result, for instance, from unfairly asking vendors that distribute
market data in a display-only format to pay the same fees as vendors
that distribute market data for non-display use to professionals that
derive substantial value from such non-display uses.
Intermarket Competition. The Exchange believes that the proposed
fees do not impose a burden on
[[Page 71515]]
competition or on other exchanges that is not necessary or appropriate;
indeed, the Exchange believes the proposed fee changes would have the
effect of increasing competition. As demonstrated above and in
Professor Rysman's attached paper, exchanges are platforms for market
data and trading. In setting the proposed fees, the Exchange is
constrained by the availability of substitute platforms also offering
market data products and trading, and low barriers to entry mean new
exchange platforms are frequently introduced. The fact that exchanges
are platforms ensures that no exchange can make pricing decisions for
one side of its platform without considering, and being constrained by,
the effects that price will have on the other side of the platform. In
setting fees at issue here, the Exchange is constrained by the fact
that, if its pricing across the platform is unattractive to customers,
customers will have its pick of an increasing number of alternative
platforms to use instead of the Exchange. Given this intense
competition between platforms, no one exchange's market data fees can
impose an unnecessary burden on competition, and the Exchange's
proposed fees do not do so here.
In addition, the Exchange believes that the proposed fees do not
impose a burden on competition or on other exchanges that is not
necessary or appropriate because of the availability of numerous
substitute market data products. Specifically, as described above, NYSE
BQT competes head-to-head with the Nasdaq Basic product and the Cboe
One Feed. These products each serve as reasonable substitutes for one
another as they are each designed to provide investors with a unified
view of real-time quotes and last-sale prices in all Tape A, B, and C
securities. Each product provides subscribers with consolidated top-of-
book quotes and trades from multiple U.S. equities markets. NYSE BQT
provides top-of-book quotes and trades data from five NYSE-affiliated
U.S. equities exchanges, while Cboe One Feed similarly provides top-of-
book quotes and trades data from Cboe's four U.S. equities exchanges.
NYSE BQT, Nasdaq Basic, and Cboe One Feed are all intended to provide
indicative pricing and therefore, are reasonable substitutes for one
another. Additionally, market data vendors are also able to offer close
substitutes to NYSE BQT. Because market data users can find suitable
substitute feeds, an exchange that overprices its market data products
stands a high risk that users may substitute another source of market
data information for its own. These competitive pressures ensure that
no one exchange's market data fees can impose an unnecessary burden on
competition, and the Exchange's proposed fees do not do so here.
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) \77\ of the Act and subparagraph (f)(2) of Rule
19b-4 \78\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\77\ 15 U.S.C. 78s(b)(3)(A).
\78\ 17 CFR 240.19b-4(f)(2).
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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) \79\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\79\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSE-2019-70 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to File Number SR-NYSE-2019-70. 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-2019-70 and should be submitted on
or before January 17, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\80\
J. Matthew DeLesDernier,
Assistant Secretary.
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\80\ 17 CFR 200.30-3(a)(12).
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[FR Doc. 2019-27871 Filed 12-26-19; 8:45 am]
BILLING CODE 8011-01-P
