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]

Download as PDF Federal Register / Vol. 84, No. 248 / Friday, December 27, 2019 / Notices is necessary for the proper performance of the functions of the agency, including whether the information will have practical utility; (b) the accuracy of the agency’s estimate of the burden imposed by the collection of information; (c) ways to enhance the quality, utility, and clarity of the information collected; and (d) ways to minimize the burden of the collection of information on respondents, including through the use of automated collection techniques or other forms of information technology. Consideration will be given to comments and suggestions submitted in writing within 60 days of this publication. Please direct your written comments to Charles Riddle, Acting Director/Chief Information Officer, Securities and Exchange Commission, c/o Cynthia Roscoe, 100 F Street NE, Washington, DC 20549 or send an email to: PRA_ Mailbox@sec.gov. Dated: December 19, 2019. J. Matthew DeLesDernier, Assistant Secretary. [FR Doc. 2019–27863 Filed 12–26–19; 8:45 am] BILLING CODE 8011–01–P 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 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. VerDate Sep<11>2014 Amendment No. 1, from interested persons. Jkt 250001 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. PO 00000 Frm 00158 Fmt 4703 Sfmt 4703 71505 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 http:// 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 http:// markets.cboe.com/us/equities/market_share/. E:\FR\FM\27DEN1.SGM 27DEN1 71506 Federal Register / Vol. 84, No. 248 / Friday, December 27, 2019 / Notices 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 jbell on DSKJLSW7X2PROD with NOTICES 10 As described on the Nasdaq website, available here: http://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. VerDate Sep<11>2014 18:44 Dec 26, 2019 Jkt 250001 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. PO 00000 Frm 00159 Fmt 4703 Sfmt 4703 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). E:\FR\FM\27DEN1.SGM 27DEN1 Federal Register / Vol. 84, No. 248 / Friday, December 27, 2019 / Notices jbell on DSKJLSW7X2PROD with NOTICES 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. VerDate Sep<11>2014 18:44 Dec 26, 2019 Jkt 250001 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 PO 00000 Frm 00160 Fmt 4703 Sfmt 4703 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. E:\FR\FM\27DEN1.SGM 27DEN1 jbell on DSKJLSW7X2PROD with NOTICES 71508 Federal Register / Vol. 84, No. 248 / Friday, December 27, 2019 / Notices 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). VerDate Sep<11>2014 18:44 Dec 26, 2019 Jkt 250001 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 PO 00000 U.S.C. 78f(b). U.S.C. 78f(b)(4), (5). Frm 00161 Fmt 4703 Sfmt 4703 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’’). E:\FR\FM\27DEN1.SGM 27DEN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 84, No. 248 / Friday, December 27, 2019 / Notices • ‘‘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. VerDate Sep<11>2014 18:44 Dec 26, 2019 Jkt 250001 PO 00000 Frm 00162 Fmt 4703 Sfmt 4703 71509 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. E:\FR\FM\27DEN1.SGM 27DEN1 71510 Federal Register / Vol. 84, No. 248 / Friday, December 27, 2019 / Notices • ‘‘[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 jbell on DSKJLSW7X2PROD with NOTICES 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. VerDate Sep<11>2014 18:44 Dec 26, 2019 Jkt 250001 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 http:// 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 http:// 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 PO 00000 Frm 00163 Fmt 4703 Sfmt 4703 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. E:\FR\FM\27DEN1.SGM 27DEN1 Federal Register / Vol. 84, No. 248 / Friday, December 27, 2019 / Notices 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. jbell on DSKJLSW7X2PROD with NOTICES 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/. VerDate Sep<11>2014 18:44 Dec 26, 2019 Jkt 250001 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 PO 00000 Frm 00164 Fmt 4703 Sfmt 4703 71511 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. E:\FR\FM\27DEN1.SGM 27DEN1 71512 Federal Register / Vol. 84, No. 248 / Friday, December 27, 2019 / Notices 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. jbell on DSKJLSW7X2PROD with NOTICES 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. VerDate Sep<11>2014 18:44 Dec 26, 2019 Jkt 250001 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. PO 00000 Frm 00165 Fmt 4703 Sfmt 4703 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 http://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 http://markets.cboe.com/us/equities/ membership/fee_schedule/bzx/. 76 See Section 112(b)(1) of Nasdaq’s Equity 7 Pricing Schedule. E:\FR\FM\27DEN1.SGM 27DEN1 Federal Register / Vol. 84, No. 248 / Friday, December 27, 2019 / Notices jbell on DSKJLSW7X2PROD with NOTICES 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 VerDate Sep<11>2014 18:44 Dec 26, 2019 Jkt 250001 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 PO 00000 Frm 00166 Fmt 4703 Sfmt 4703 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 E:\FR\FM\27DEN1.SGM 27DEN1 jbell on DSKJLSW7X2PROD with NOTICES 71514 Federal Register / Vol. 84, No. 248 / Friday, December 27, 2019 / Notices 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 VerDate Sep<11>2014 18:44 Dec 26, 2019 Jkt 250001 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 PO 00000 Frm 00167 Fmt 4703 Sfmt 4703 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 E:\FR\FM\27DEN1.SGM 27DEN1 jbell on DSKJLSW7X2PROD with NOTICES Federal Register / Vol. 84, No. 248 / Friday, December 27, 2019 / Notices 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 VerDate Sep<11>2014 18:44 Dec 26, 2019 Jkt 250001 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 (http://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 (http://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 PO 00000 Frm 00168 Fmt 4703 Sfmt 4703 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]


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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.
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    \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.
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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.
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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\
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    \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'').
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    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\
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    \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 http://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 http://markets.cboe.com/us/equities/market_share/.
---------------------------------------------------------------------------

    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: http://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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    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\
---------------------------------------------------------------------------

    \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.
---------------------------------------------------------------------------

    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.

---------------------------------------------------------------------------

[[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\
---------------------------------------------------------------------------

    \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 http://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 http://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 
http://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 http://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.

---------------------------------------------------------------------------

[[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.
---------------------------------------------------------------------------

    \77\ 15 U.S.C. 78s(b)(3)(A).
    \78\ 17 CFR 240.19b-4(f)(2).
---------------------------------------------------------------------------

    At any time within 60 days of the filing of such proposed rule 
change, the Commission summarily may temporarily suspend such rule 
change if it appears to the Commission that such action is necessary or 
appropriate in the public interest, for the protection of investors, or 
otherwise in furtherance of the purposes of the Act. If the Commission 
takes such action, the Commission shall institute proceedings under 
Section 19(b)(2)(B) \79\ of the Act to determine whether the proposed 
rule change should be approved or disapproved.
---------------------------------------------------------------------------

    \79\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------

IV. Solicitation of Comments

    Interested persons are invited to submit written data, views, and 
arguments concerning the foregoing, including whether the proposed rule 
change is consistent with the Act. Comments may be submitted by any of 
the following methods:

Electronic Comments

     Use the Commission's internet comment form (http://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 (http://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