Self-Regulatory Organizations; NYSE National, Inc.; Notice of Filing and Immediate Effectiveness of Proposed Rule Change To Establish Fees for the NYSE National Integrated Feed, 9847-9859 [2020-03411]
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Federal Register / Vol. 85, No. 34 / Thursday, February 20, 2020 / Notices
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.52
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020–03317 Filed 2–19–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88211; File No. SR–
NYSENAT–2020–05]
Self-Regulatory Organizations; NYSE
National, Inc.; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Establish Fees for the
NYSE National Integrated Feed
February 14, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934
(‘‘Act’’),2 and Rule 19b–4 thereunder,3
notice is hereby given that on February
3, 2020, NYSE National, Inc. (‘‘NYSE
National’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
and III below, which Items have been
prepared by the Exchange. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to establish
fees for the NYSE National Integrated
Feed. 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.
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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.
52 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 15 U.S.C. 78a.
3 17 CFR 240.19b–4.
1 15
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to adopt the
NYSE National Proprietary Market Data
Fee Schedule (‘‘Fee Schedule’’) and
establish the fees for the NYSE National
Integrated Feed that would be effective
February 3, 2020.4
In summary, the NYSE National
Integrated Feed is a NYSE National-only
market data feed that provides vendors
and subscribers on a real-time basis
with a unified view of events, in
sequence, as they appear on the NYSE
National matching engine. The NYSE
National Integrated Feed includes
depth-of-book order data, last sale data,
security status updates (e.g., trade
corrections and trading halts), and stock
summary messages. Because the NYSE
National Integrated Feed has a unified
view of events, in sequence, it also
includes information about the
Exchange’s best bid or offer at any given
time.
The Exchange currently does not
charge any fees for the NYSE National
Integrated Feed market data product.5
The Exchange initially filed to
introduce fees for the NYSE National
Integrated Feed on December 4, 2019
(the ‘‘Initial Proposal’’).6 Pursuant to the
Initial Proposal, the fees would not be
implemented until February 3, 2020.
The Initial Proposal was published in
the Federal Register and two comment
letters were submitted in response. The
Initial Proposal was temporarily
suspended pursuant to a Suspension
Order (the ‘‘Initial Suspension Order’’).7
The Initial Suspension Order also
instituted proceedings to determine
whether to approve or disapprove the
Initial Proposal.
4 The
proposed rule change establishing the
NYSE National Integrated Feed was immediately
effective on May 31, 2018. See Securities Exchange
Act Release No. 83350 (May 31, 2018), 83 FR 26332
(June 6, 2018) (SR–NYSENAT–2018–09) (‘‘NYSE
National Integrated Feed Product Filing’’). The
NYSE National Integrated Feed Product Filing also
established the NYSE National BBO and NYSE
National Trades market data feeds.
5 The Exchange also currently does not charge
any fees for the NYSE National BBO and NYSE
National Trades market data products and proposes
to adopt rule text on the Fee Schedule to reflect that
there are no fees charged for NYSE National BBO
and NYSE National Trades market data products.
6 See Securities Exchange Act Release No. 87797
(December 18, 2019), 84 FR 71025 (December 26,
2019).
7 See Securities Exchange Act Release No. 88109
(January 31, 2020) (SR–NYSENAT–2019–13)
(‘‘Initial Suspension Order’’).
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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.’’ 8
As the Commission itself recognized,
the market for trading services in NMS
stocks has become ‘‘more fragmented
and competitive.’’ 9 Equity trading is
currently dispersed across 13
exchanges,10 31 alternative trading
systems,11 and numerous broker-dealer
internalizers and wholesalers, all
competing for order flow. Based on
publicly-available information, no
single exchange has more than 18%
market share (whether including or
excluding auction volume).12
The recent growth of NYSE National’s
market share demonstrates this
competitive marketplace. Between
February 2017 and mid-May 2018,
NYSE National was non-operational,
and therefore had 0% of market share.
On May 21, 2018, NYSE National relaunched on its current platform as an
affiliated exchange of New York Stock
Exchange, LLC (‘‘NYSE’’), NYSE Arca,
Inc. (‘‘NYSE Arca, Inc.’’), and NYSE
American LLC (‘‘NYSE American’’).
Within four months, NYSE National
began regularly executing 1% of
consolidated trading volume. By August
2019, NYSE National began executing
approximately 1.5% of consolidated
trading volume on a more regular basis.
By October 2019, the Exchange had
8 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’’).
9 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’’).
10 See Cboe Global Markets, U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/. See
generally https://www.sec.gov/fast-answers/
divisionsmarketregmrexchangesshtml.html.
11 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.
12 See Cboe Global Markets, U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/.
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1.9% market share of executed volume
of equity trades.13
As NYSE National’s transaction
market share has increased, so has the
value of its market data. For example, in
May 2018, when NYSE National relaunched trading operations, the
Exchange had 12 customers for its NYSE
National Integrated Feed. As NYSE
National’s market share has increased,
the number of subscribers of the NYSE
National Integrated Feed has steadily
increased and as of November 2019, the
Exchange had 57 customers that
subscribed to the NYSE National
Integrated Feed. In November 2019,
customers of the NYSE National
Integrated Feed accounted for over 99%
of the executed trade volume on the
Exchange.
On December 4, 2019, the Exchange
filed the Initial Proposal to introduce
fees for the NYSE National Integrated
Feed, effective February 3, 2020. The
Exchange explained in the Initial
Proposal that it filed its proposed rule
change early, in December 2019,
because the Exchange believed it was
appropriate to provide market
participants with early notice of the
proposed changes, so that they could
begin determining whether the value of
the NYSE National Integrated Feed to
their businesses is such that they would
choose to continue using the product
once it was no longer provided for free.
The Exchange explained that it believes
that market participants should have the
opportunity to begin such
determinations before the Exchange
begins charging fees.
Since the date of the Initial Proposal
and before the proposed fees went into
effect, five subscribers to the NYSE
National Integrated Feed product (i.e.,
nearly nine percent of the prior
subscriber base) have canceled their
subscriptions. In each instance, the
subscriber told the Exchange that its
reason for cancelling its subscription
was the imminent imposition of fees. A
sixth customer informed the Exchange
that if the Exchange is permitted to
impose the fees, the customer will
cancel its subscription to the NYSE
National Integrated Feed product and
instead subscribe to the NYSE National
BBO feed, which will remain available
for free. These six lost subscribers
constitute 10.5 percent of the prior
subscriber base.
Proposed NYSE National Integrated
Feed Fees
To reflect the value of NYSE
National’s market data, as correlated to
the Exchange’s increased transaction
13 See
id.
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volume market share, the Exchange
proposes to establish the fees listed
below for the NYSE National Integrated
Feed, operative on February 3, 2020.
The Exchange proposes to charge fees
for the same categories of market data
use as its affiliated exchanges (namely,
NYSE, NYSE Arca, and NYSE
American) currently charge. The
Exchange believes that adopting the
same fee structure as its affiliated
exchanges would reduce administrative
burdens on NYSE National market data
subscribers that also currently subscribe
to market data feeds from NYSE, NYSE
Arca, or NYSE American.
1. Access Fee. For the receipt of
access to the NYSE National Integrated
Feed, the Exchange proposes to charge
$2,500 per month. This proposed
Access Fee would be charged to any
data recipient that receives a data feed
of the NYSE National Integrated Feed.
Data recipients that only use display
devices to view NYSE National
Integrated Feed market data and do not
separately receive a data feed would not
be charged an Access Fee. The proposed
Access Fee is charged only once per
firm.
2. Redistribution Fee. For
redistribution of the NYSE National
Integrated Feed, the Exchange proposes
to establish a fee of $1,500 per month.
The proposed Redistribution Fee would
be charged to any Redistributors of the
NYSE National Integrated Feed, which
is defined to mean a vendor or any
person that provides a real-time NYSE
National market data product externally
to a data recipient that is not its affiliate
or wholly-owned subsidiary, or to any
system that an external data recipient
uses, irrespective of the means of
transmission or access. The proposed
Redistribution Fee is charged only once
per Redistributor account.
3. User Fees. The Exchange proposes
to charge a Professional User Fee (Per
User) of $10 per month and a NonProfessional User Fee (Per User) of $1
per month. These user fees would apply
to each display device that has access to
the NYSE National Integrated Feed.
4. Non-Display Use Fees. The
Exchange proposes to establish nondisplay fees for the NYSE National
Integrated Feed that are based on the
non-display use categories charged by
NYSE, NYSE Arca, NYSE American, the
Consolidated Tape Association, and the
UTP Plan for non-display use.14 Non14 See Endnote 1 to the NYSE Proprietary Market
Data Fees, available here: https://www.nyse.com/
publicdocs/nyse/data/NYSE_Market_Data_Fee_
Schedule.pdf; Endnote 1 to the NYSE Arca Equites
Proprietary Market Data Fees, available here:
https://www.nyse.com/publicdocs/nyse/data/
NYSE_Arca_Equities_Fee_Schedule.pdf; Endnote 1
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display use would mean accessing,
processing, or consuming the NYSE
National Integrated Feed, delivered
directly or through a Redistributor, for
a purpose other than in support of a
data recipient’s display or further
internal or external redistribution
(‘‘Non-Display Use’’). Non-Display Use
would include trading uses such as high
frequency or algorithmic trading as well
as any trading in any asset class,
automated order or quote generation
and/or order pegging, price referencing
for algorithmic trading or smart order
routing, operations control programs,
investment analysis, order verification,
surveillance programs, risk
management, compliance, and portfolio
management.
The Exchange proposes three
categories of Non-Display Use of the
NYSE National Integrated Feed and
related fees applicable to each category.
One, two, or three categories of NonDisplay Use may apply to a data
recipient.
• As proposed, the Category 1 Fee
would be $5,000 per month and would
apply when a data recipient’s NonDisplay Use of the NYSE National
Integrated Feed is on its own behalf, not
on behalf of its clients.
• As proposed, Category 2 Fees
would be $5,000 per month and would
apply to a data recipient’s Non-Display
Use of the NYSE National Integrated
Feed on behalf of its clients.
• As proposed, Category 3 Fees
would be $5,000 per month and would
apply to a data recipient’s Non-Display
Use of the NYSE National Integrated
Feed for the purpose of internally
matching buy and sell orders within an
organization, including matching
customer orders for a data recipient’s
own behalf and/or on behalf of its
clients. This category would apply to
Non-Display Use in trading platforms,
such as, but not restricted to, alternative
trading systems (‘‘ATSs’’), broker
crossing networks, broker crossing
systems not filed as ATSs, dark pools,
to the NYSE American LLC Equities Proprietary
Market Data Fees, available here: https://
www.nyse.com/publicdocs/nyse/data/NYSE_
American_Equities_Market_Data_Fee_
Schedule.pdf; Endnote 8 to the Schedule of Market
Data Charges for the Consolidated Tape
Association, available here: https://
www.ctaplan.com/publicdocs/ctaplan/
notifications/trader-update/
Schedule%20Of%20Market%
20Data%20Charges%20%20January%201,%202015.pdf; and Non-Display
Usage Fees as set forth in the UTP Plan Fee
Schedule and Non-Display Policy, available here:
https://utpplan.com/DOC/Datapolicies.pdf. See, e.g.,
Securities Exchange Act Release Nos. 69278 (April
2, 2013), 78 FR 20973 (April 8, 2013) (SR–NYSE–
2013–25) and 72923 (Aug. 26, 2014), 79 FR 52079
(Sept. 2, 2014) (SR–NYSE–2014–43).
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multilateral trading facilities, exchanges
and systematic internalization systems.
A data recipient will be charged $5,000
per month for each platform on which
it uses the Non-Display data internally
to match buy and sell orders, up to a cap
of $15,000 per month; even if the data
recipient uses the NYSE National
Integrated Feed for more than three
platforms, it will not pay more than
$15,000 for such Category 3 use per
month.
The Exchange proposes to adopt the
description of the three non-display use
categories in the Fee Schedule in
proposed endnote 1 on the Fee
Schedule.15
Data recipients that receive the NYSE
National Integrated Feed for NonDisplay Use would be required to
complete and submit a Non-Display Use
Declaration before they would be
authorized to receive the feed. A firm
subject to Category 3 Fees would be
required to identify each platform that
uses the NYSE National Integrated Feed
for a Category 3 Non-Display Use basis,
such as ATSs and broker crossing
systems not registered as ATSs, as part
of the Non-Display Use Declaration.
5. Non-Display Use Declaration Late
Fee. Data recipients that receive the
NYSE National Integrated Feed for NonDisplay Use would be required to
complete and submit a Non-Display Use
Declaration before they would be
authorized to receive the feed. NYSE
National Integrated Feed data recipients
would be required to submit, by
December 31 of each year, the NonDisplay Use Declaration. The
requirement to submit a Non-Display
Use Declaration would apply to all realtime NYSE National data feed product
recipients. The Exchange proposes to
charge a Non-Display Use Declaration
Late Fee of $1,000 per month to any
data recipient that pays an Access Fee
for the NYSE National Integrated Feed
that has failed to timely complete and
submit a Non-Display Use Declaration.
Specifically, with respect to the NonDisplay Use Declaration due by
December 31 of each year, the NonDisplay Use Declaration Late Fee would
apply to data recipients that fail to
complete and submit the Non-Display
Use Declaration by the December 31 due
date, and would apply beginning
January 1 and for each month thereafter
until the data recipient has completed
and submitted the annual Non-Display
Use Declaration.
The proposed Non-Display Use
Declaration Late Fee would be set forth
in endnote 2 on the Fee Schedule.
Proposed endnote 2 would provide that
15 See
Fee Schedule, proposed endnote 1.
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a data recipient that pays an Access Fee
and that fails to timely complete and
submit a Non-Display Use Declaration
must pay the Non-Display Use
Declaration Late Fee.16 Proposed
endnote 2 to the Fee Schedule would
also provide that the annual NonDisplay Use Declaration would be due
by December 31 of each year. Finally,
proposed endnote 2 would provide that
the Non-Display Use Declaration Late
Fee would apply to data recipients that
fail to complete and submit the annual
Non-Display Use Declaration by the
December 31 due date, and would apply
beginning January 1 of each year and for
each month thereafter until the data
recipient has completed and submitted
the annual Non-Display Use
Declaration.
In addition, if a data recipient’s use of
the NYSE National Integrated Feed data
changes at any time after the data
recipient submits a Non-Display Use
Declaration, the data recipient must
inform the Exchange of the change by
completing and submitting at the time
of the change an updated declaration
reflecting the change of use.
6. Multiple Data Feed Fee. The
Exchange proposes to establish a
monthly fee, the ‘‘Multiple Data Feed
Fee,’’ that would apply to data
recipients that take a data feed for a
market data product in more than two
locations. Data recipients taking the
NYSE National Integrated Feed in more
than two locations would be charged
$200 per additional location per month.
No new reporting would be required.17
7. Fee Waiver for Federal Agencies.
The Exchange proposes to adopt rule
text in the Fee Schedule with respect to
Federal agencies that subscribe to the
NYSE National Integrated Feed. The
proposed rule would provide that
market data fees would not apply to any
Federal agency for their use of NYSE
National real-time proprietary market
data products. The term ‘‘Federal
agency’’ as used in the Fee Schedule
would include all Federal agencies
subject to the Federal Acquisition
Regulation (FAR),18 as well as any
Federal agency not subject to FAR that
has promulgated its own procurement
16 See
Fee Schedule, proposed endnote 2.
vendors currently report a unique Vendor
Account Number for each location at which they
provide a data feed to a data recipient. The
Exchange considers each Vendor Account Number
a location. For example, if a data recipient has five
Vendor Account Numbers, representing five
locations, for the receipt of the NYSE National
Integrated Feed product, that data recipient will pay
the Multiple Data Feed fee with respect to three of
the five locations.
18 FAR is the principal set of rules governing the
process by which the U.S. federal government
purchases goods and services.
17 Data
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9849
rules.19 More specifically, the Exchange
proposes to specify that access fees,
professional user fees and non-display
fees would not apply to Federal
agencies for those products to which
those fees apply.20 The proposed fee
waiver is designed to allow the
Exchange to provide Federal agencies
with NYSE National real-time
proprietary market data products at no
cost in support of Federal agencies’
regulatory responsibilities. With the
adoption of the proposed fee waiver, the
Exchange is not waiving any other
contractual rights, and all Federal
agencies that subscribe to NYSE
National real-time proprietary market
data products will be required to
execute the appropriate subscriber
agreement, which includes, among other
things, provisions against the
redistribution of data.
8. One-Month Free Trial. Finally, the
Exchange proposes a one-month free
trial for any firm that subscribes to a
particular NYSE National 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 National market
data product listed on the Fee Schedule.
As proposed, a first-time subscriber of a
particular NYSE National market data
product would not be charged the
Access Fee, Non-Display Fee, any
applicable Professional and NonProfessional User Fee, and
Redistribution Fee for that product for
one calendar month. For example, a
firm that currently subscribes to NYSE
National BBO for free would be eligible
to receive a free one-month trial of the
NYSE National Integrated Feed, whether
in a display-only format or for nondisplay use. On the other hand, if a firm
pays an Access Fee and receives the
NYSE National Integrated Feed for nondisplay use, it would not be eligible to
receive a free one-month trial of the
NYSE National Integrated Feed in a
display-only format (or vice-versa). 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 National
19 See 48 CFR 2.101. FAR defines ‘‘Federal
agency’’ as ‘‘any executive agency or any
independent establishment in the legislative or
judicial branch of the Government (except the
Senate, the House of Representatives, the Architect
of the Capitol, and any activities under the
Architect’s direction).’’ ‘‘Executive agency’’ is
defined as ‘‘an executive department, a military
department, or any independent establishment
within the meaning of 5 U.S.C. 101, 102, and
104(1), respectively, and any wholly owned
Government corporation within the meaning of 31
U.S.C. 9101.’’
20 Currently, pursuant to this proposed rule
change, the NYSE National Integrated Feed is the
only product to which fees would apply.
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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 National
market data products listed on the Fee
Schedule would enable potential
subscribers to determine whether a
particular NYSE National 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.
Application of Proposed Fees
The Exchange is not required to make
the NYSE National Integrated Feed
available or to offer any specific pricing
alternatives to any customers, nor is any
firm required to purchase the NYSE
National Integrated Feed. Firms that
choose to purchase the NYSE National
Integrated Feed do so for the primary
goals of using it to increase their
revenues, reduce their expenses, and in
some instances to compete directly with
the Exchange (including for order flow).
Those firms are able to determine for
themselves whether or not the NYSE
National Integrated Feed or any other
similar products are attractively priced.
The Exchange produces and
disseminates the NYSE National
Integrated Feed as part of its market data
offerings to support its transaction
execution services. Since May 2018,
when NYSE National relaunched
trading, the Exchange has observed a
direct correlation between the steady
increase of subscribers to the NYSE
National Integrated Feed and the
increase in the Exchange’s transaction
market share volume over the same
period.
Based on the reported usage of the
NYSE National Integrated Feed, the
Exchange believes that its data
subscribers use the order-by-order detail
information available in this market
data product to make trading decisions
that directly benefit the transaction
services that the Exchange offers.
Specifically, in the period before the
Initial Proposal was published,
subscribers of the NYSE National
Integrated Feed represented firms that
provided over 99% of the Exchange’s
executed transaction volume. More than
half of the feed’s subscribers overall
(i.e., 34 of 57) reported ‘‘Category 1’’
non-display use of the NYSE National
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Integrated Feed, which means that they
used the data for trading on their own
behalf. This figure confirms that a
substantial portion of the NYSE
National Integrated Feed’s subscribers
analyzed whether it was in their
business interest to use the feed for their
own trading, and concluded that it was.
The Exchange determined the level of
the fees to charge for the NYSE National
Integrated Feed based on the value of
the Exchange’s transaction services. As
noted above, over an 18-month period,
NYSE National has grown from 0% to
nearly 2% market share of consolidated
trading volume. During that same
period, the Exchange has had a steady
increase in the number of subscribers to
the NYSE National Integrated feed.
The proposed fee structure is not
novel as it is based on the fee structure
currently in place for the NYSE
American Integrated Feed.21 Both NYSE
American and NYSE National trade all
NMS Stocks. As noted above, in October
2019, NYSE National had 1.9% market
share; for that same month, NYSE
American had 0.29% market share.22
Even though NYSE National’s market
share is several times higher than NYSE
American’s, the Exchange is proposing
fees for the NYSE National Integrated
Feed that are based on the existing fee
structure and rates that data recipients
already pay for the NYSE American
Integrated Feed. Specifically, the fees
for the NYSE American Integrated
Feed—which like the NYSE National
Integrated Feed, includes top of book,
depth of book, trades, and security
status messages—consist of an Access
Fee of $2,500 per month, a Professional
User Fee (Per User) of $10 per month,
a Non-Professional User Fee (Per User)
of $2 per month, Non-Display Fees of
$5,000 per month for each of Categories
1, 2 and 3, and a Redistribution Fee of
$1,500 per month. NYSE American also
charges a Non-Display Use Declaration
Late Fee of $1,000 per month and a
Multiple Data Feed Fee of $200 per
month.23
21 See Securities Exchange Act Release Nos.
76525 (November 25, 2015), 80 FR 75148
(December 1, 2015) (SR–NYSEMKT–2015–95)
(Notice of filing and immediate effectiveness of
proposed rule change to establish fees for NYSE
MKT Integrated Feed), and 76975 (January 26,
2016), 81 FR 5139 (February 1, 2016) (SR–
NYSEMKT–2016–11) (Notice of filing and
immediate effectiveness of proposed rule change
amending the fees for NYSE MKT Integrated Feed
to add a Multiple Data Feed Fee).
22 See Cboe Global Markets, U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/.
23 See NYSE American LLC Equities Proprietary
Market Data Fees at https://www.nyse.com/
publicdocs/nyse/data/NYSE_American_Equities_
Market_Data_Fee_Schedule.pdf.
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In the Initial Proposal, the Exchange
noted that each of the then-current
subscribers to the NYSE National
Integrated Feed would be impacted by
the proposed rule change, and that the
scope of the fee impact for each data
recipient would depend on that data
recipient’s use of the data. The
Exchange noted that, based on current
usage, at least 34 firms would be subject
to Category 1 Non-Display Use fees, at
least 14 firms would be subject to
Category 2 Non-Display Use fees, and at
least 10 firms would be subject to
Category 3 Non-Display Use fees.
The Exchange further explained that,
because the NYSE National Integrated
Feed had not been previously been
subject to fees, the Exchange did not
know the full impact of the proposed
fees on current data recipients because
subscribers may choose to reduce or
eliminate their use of data. The
Exchange stated that it anticipated that
there might be data recipients of the
NYSE National Integrated Feed that
subscribed only because it was free and
might choose to discontinue using the
product once the fees were
implemented. The Exchange noted that
a data recipient that chooses to
discontinue the NYSE National
Integrated Feed may also choose to shift
order flow away from the Exchange, and
that, given the current competitive
environment, if data recipients were to
both discontinue the product and shift
order flow away from the Exchange, the
Exchange would reevaluate the fees and
potentially file a separate proposed rule
change to amend its fees. The Exchange
explained that in advance of
implementing the proposed fees,
however, the Exchange could not
estimate with precision the impact of
the proposed fees on the Exchange’s
transaction services business or the
number of NYSE National Integrated
Feed subscribers.
Since the Initial Proposal became
publicly known on December 4, 2019,
five subscribers to the NYSE National
Integrated Feed product have canceled
their subscriptions. In each instance, the
subscriber told the Exchange that the
reason for ending its subscription was
the imminent imposition of fees. A sixth
customer informed the Exchange that if
the Exchange is permitted to impose the
fees, the customer will cancel its
subscription to the NYSE National
Integrated Feed product and instead
subscribe to the NYSE National BBO
feed, which will remain available for
free.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
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the provisions of Section 6 of the Act,24
in general, and Sections 6(b)(4) and
6(b)(5) of the Act,25 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.
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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
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.’’ 26
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.’’ 27
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.’ ’’ 28
In this competitive marketplace, the
Exchange’s executed trading volume has
24 15
U.S.C. 78f(b).
U.S.C. 78f(b)(4), (5).
26 See Regulation NMS Adopting Release, 70 FR
37495, at 37499.
27 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).
28 Id. at 535.
25 15
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grown from 0% market share to nearly
2% market share in less than two years
and the Exchange believes that it is
reasonable to begin charging fees for the
NYSE National Integrated Feed.
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 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.29 Among other things, Professor
Jones concluded that:
• ‘‘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 [as NYSE National has
done with its Integrated Feed] by
offering their proprietary market data
products for free for some period of
time.’’ 30
• ‘‘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.’’ 31
• ‘‘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.’’ 32
29 See Exhibit 3A, Charles M. Jones,
Understanding the Market for U.S. Equity Market
Data, August 31, 2018 (hereinafter ‘‘Jones Paper’’).
30 Id. at 2.
31 Id.
32 Id.
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• ‘‘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.’’ 33
• ‘‘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, [again, as NYSE National
has done with its Integrated Feed]
serving as a check on pricing by more
established exchanges. These are all the
standard hallmarks of a competitive
market.’’ 34
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. When the
platform theory of competition applies,
an exchange is not additionally required
to demonstrate that there is a substitute
for the specific market data product at
issue, because the relevant question is
whether a constraint on fees exists, not
the specific mechanism of constraint.
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.’’ 35 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
33 Id.
34 Id.
at 39–40.
v. American Express, 138 S. Ct. 2274,
2280–81 (2018).
35 Ohio
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account for the influence of the other
sides. As the Supreme Court explained:
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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.36
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 publicly 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 at 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.37
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 its
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 similar to
36 Id.
at 2281.
37 See Exhibit 3B, Marc Rysman, Stock Exchanges
as Platforms for Data and Trading, December 2,
2019 (hereinafter ‘‘Rysman Paper’’), ¶ 6.
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the NYSE National Integrated Feed that
is the subject of this fee filing.38
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.39 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.40 This is the sort of
externality that is a key characteristic of
a platform market.41
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.’’ 42
• ‘‘[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.’’ 43
• 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.’’ 44
38 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).
39 Rysman Paper ¶¶ 80–90.
40 Id. ¶¶ 91–93.
41 Id. ¶ 91.
42 Id. ¶ 95.
43 Id. ¶ 96.
44 Id.
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• ‘‘[E]mpirical evidence confirms that
stock exchanges are platforms for data
and trading.’’ 45
• ‘‘The platform nature of stock
exchanges means that data fees cannot
be analyzed in isolation, without
accounting for the competitive
dynamics in trading services.’’ 46
• ‘‘Competition is properly
understood as being between platforms
(i.e., stock exchanges) that balance the
needs of consumers of data and
traders.’’ 47
• ‘‘Data fees, data use, trading fees,
and order flow are all interrelated.’’ 48
• ‘‘Competition for order flow can
discipline the pricing of market data,
and vice-versa.’’ 49
• ‘‘As with platforms generally,
overall competition between exchanges
will limit their overall profitability, not
margins on any particular side of the
platform.’’ 50
The Exchange has observed a similar
correlation in connection with its
offering of the NYSE National Integrated
Feed. Since May 2018, when the
Exchange re-launched trading, the
number of subscribers of the NYSE
National Integrated Feed grew from 12
to a high of 57. Over this same period,
the Exchange has increased market
share from 0% to nearly 2%. The
Exchange therefore believes that its
proposed fees for the NYSE National
Integrated Feed are subject to platformbased competitive constraints on
pricing.
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. As the
D.C. Circuit recognized in NetCoalition
I, ‘‘[n]o one disputes that competition
for order flow is fierce.’’ 51 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.’’ 52
45 Id.
46 Id.
¶ 97.
¶ 98.
47 Id.
48 Id.
49 Id.
50 Id.
¶ 100.
51 NetCoalition
I, 615 F.3d at 544 (internal
quotation omitted).
52 Id.
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Similarly, the Commission itself has
recognized that the market for trading
services in NMS stocks has become
‘‘more fragmented and competitive.’’ 53
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.’’ 54
Indeed, today, equity trading is
currently dispersed across 13
exchanges,55 31 alternative trading
systems,56 and numerous broker-dealer
internalizers and wholesalers, all
competing for order flow. Based on
publicly-available information, no
single exchange has more than 18%
market share.57
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.58 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; 59 Members
Exchange (MEMX), which has recently
filed its application to be approved as a
registered equities exchange; 60 and
Miami International Holdings (MIAX),
which has announced its plan to
53 See Securities Exchange Act Release No. 51808,
84 FR 5202, 5253 (February 20, 2019) (File No. S7–
05–18).
54 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.
55 See Cboe Global Markets, U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/. See
generally https://www.sec.gov/fast-answers/
divisionsmarketregmrexchangesshtml.html.
56 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.
57 See Cboe Global Markets U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/.
58 See Jones Paper at 10–11.
59 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).
60 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).
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introduce equities trading on an existing
registered options exchange.61
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.62 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.63 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 here in setting its fees for
the NYSE National Integrated Feed.
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 setting fees for
the NYSE National Integrated Feed, the
Exchange is constrained by the fact that,
if its pricing across the platform is
unattractive to customers, customers
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
61 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.
62 Rysman Paper ¶ 98.
63 See Jones Paper at 11.
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competitive market in which it operates
as a platform.
d. NYSE National Integrated Feed Is an
Optional Market Data Product
Subscribing to the NYSE National
Integrated Feed is entirely optional. The
Exchange is not required to make the
NYSE National Integrated Feed
available to any customers, nor is any
customer required to purchase the
NYSE National Integrated Feed. 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,64 a customer’s
decision whether to purchase the NYSE
National Integrated Feed is entirely
discretionary. Most firms that choose to
subscribe to the NYSE National
Integrated Feed do so for the primary
goals of using it to increase their
revenues, reduce their expenses, and in
some instances to compete directly with
the Exchange for order flow. Such firms
are able to determine for themselves
whether the NYSE National Integrated
Feed is necessary for their business
needs, and if so, whether or not it is
attractively priced. If the NYSE National
Integrated Feed does 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 NYSE National Integrated
Feed.65 If they do not choose to use the
NYSE National Integrated Feed, they
could also choose not to direct order
flow to the Exchange.
As noted above, the current
subscribers to the NYSE National
Integrated Feed began changing their
behavior in response to the potential
imposition of fees as set out in the
Initial Proposal and herein. Since the
Initial Proposal became publicly known
on December 4, 2019, five subscribers to
the NYSE National Integrated Feed
product have canceled their
subscriptions even before the fees go
into effect. In each instance, the
subscriber told the Exchange that the
reason for ending its subscription was
the imminent imposition of fees. These
cancellations are evidence that
64 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.
65 See generally Jones Paper at 8, 10–11.
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subscribing to the NYSE National
Integrated Feed is discretionary, that
each customer makes the decision
whether to subscribe based on its own
analysis of the benefits and costs to
itself, and that customers can and do
make those decisions quickly based on
reactions to fee changes.
But even if such firms determine that
the fees for NYSE National Integrated
Feed are too high, customers can access
much of the same data on the NYSE
National Integrated Feed for free by
subscribing to the NYSE National BBO
feed (which includes best-bid-and-offer
information for NYSE National on a
real-time basis) and NYSE National
Trades (which includes last-sale
information on a real-time basis), both
of which are offered at no cost. NYSE
National top-of-book quotation
information and last-sale information is
also available on the consolidated SIP
feeds. In this way, the NYSE National
BBO, NYSE National Trades, and SIP
data products are all substitutes for a
significant portion of the data available
on the NYSE National Integrated Feed.
Indeed, as already noted, after the Initial
Proposal was made public, a sixth
customer informed the Exchange that if
the Exchange is permitted to impose the
fees as proposed, the customer will drop
its subscription to the NYSE National
Integrated Feed product and instead
subscribe to the NYSE National BBO
feed, which will remain available for
free. This is clear evidence that the
availability of these substitute products
constrains the Exchange’s ability to
charge supracompetitive prices for the
NYSE National Integrated Feed.
The only content available on NYSE
National Integrated Feed that is not
available on these other products is the
order-by-order look at the NYSE
National book, which provides
information about depth of book on the
Exchange. The Exchange has been a
vocal advocate for the creation of a ‘‘SIP
Premium’’ product that would include
depth-of-book information on the
consolidated market data feeds.66
Future products such as SIP Premium
would include not only integrated
depth-of-book information from NYSE
National, but all other exchanges as
well, and would further constrain the
Exchange’s ability to price NYSE
National Integrated Feed at a
supracompetitive price.
Further, in the case of products that
are also redistributed through market
data vendors such as Bloomberg and
Refinitiv, the vendors themselves
66 See NYSE, ‘‘Stock Quotes and Trade Data: One
Size Doesn’t Fit All’’ (August 22, 2019), posted at
https://www.nyse.com/equities-insights#20190822.
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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 redistributes
the NYSE National Integrated Feed.
Even in the absence of fees for the NYSE
National Integrated Feed, vendors have
not elected to make available the NYSE
National Integrated Feed and likely will
not unless their customers request it,
and customers will not elect to pay the
proposed fees unless the NYSE National
Integrated Feed 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.
In setting the proposed fees for the
NYSE National Integrated Feed, the
Exchange considered the
competitiveness of the market for
proprietary data and all of the
implications of that competition. The
Exchange believes that it has considered
all relevant factors and has not
considered irrelevant factors in order to
establish reasonable fees. The existence
of alternatives to the Exchange’s
platform and the continued availability
of the Exchange’s separate data feeds for
free ensure 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 the NYSE National
Integrated Feed are reasonable for the
following additional reasons.
Overall. The Exchange believes that
the proposed fees for the NYSE National
Integrated Feed are reasonable because
they represent not only the value of the
data available from the NYSE National
BBO and NYSE National Trades data
feeds but also the value of receiving the
data on an integrated basis. Receiving
the data on an integrated basis provides
greater efficiencies and reduced errors
for vendors and subscribers that
currently choose to integrate the data
themselves after receiving it from the
Exchange. Some vendors and
subscribers may not have the technology
or resources to integrate separate data
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feeds in a timely and/or efficient
manner, and thus the integration feature
of the product may be valuable to them.
The Exchange believes the proposed
fees for the NYSE National Integrated
Feed are also reasonable when
compared to fees for comparable
products, such as the NYSE American
Integrated Feed.67 Even though NYSE
National’s market share is several times
higher than NYSE American’s, the
Exchange is proposing fees for the NYSE
National Integrated Feed that are based
on the existing fee structure and rates
that data recipients already pay for the
NYSE American Integrated Feed. The
Exchange believes that adopting the
same fee structure as its affiliated
exchanges would reduce administrative
burdens on NYSE National data
subscribers that also currently subscribe
to market data feeds from NYSE, NYSE
Arca, or NYSE American.
Access Fee. The Exchange believes
that is reasonable to charge access fees
because of the value of the data to data
recipients in their profit-generating
activities. The Exchange believes that
the proposed monthly Access Fee of
$2,500 for the NYSE National Integrated
Feed is reasonable because it is
comparable to the monthly access fee
for the NYSE American Integrated Feed,
which is also $2,500.68
Redistribution Fees. The Exchange
believes that it is reasonable to charge
redistribution fees because vendors
receive value from redistributing the
data in their business products for their
customers. The Exchange believes that
charging a Redistribution Fee is
reasonable because the vendors that
would be charged such a fee profit by
re-transmitting the Exchange’s market
data to their customers. This fee would
be charged only once per month to each
vendor account that redistributes the
NYSE National Integrated Feed,
regardless of the number of customers to
which that vendor redistributes the
data. Currently, there is only one vendor
that redistributes the NYSE National
Integrated Feed. Accordingly, this
proposed fee would have limited
impact. The Exchange believes the
proposed monthly Redistribution Fee of
$1,500 for the NYSE National Integrated
Feed is reasonable because it is
comparable to the monthly
Redistribution Fee for NYSE American
Integrated Feed, which is also $1,500,
and the monthly External Distributor
67 See NYSE American Integrated Feed, https://
www.nyse.com/market-data/real-time/integratedfeed.
68 See NYSE American LLC Equities Proprietary
Market Data Fees at https://www.nyse.com/
publicdocs/nyse/data/NYSE_American_Equities_
Market_Data_Fee_Schedule.pdf.
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Fee for Nasdaq BX, Inc.’s (‘‘Nasdaq BX’’)
BX TotalView Product, which is also
$1,500.69
User Fees. The Exchange believes that
having separate Professional and NonProfessional User fees for the NYSE
National Integrated Feed is reasonable
because it will make the product more
affordable and result in greater
availability to Professional and NonProfessional Users. Setting a modest
Non-Professional User fee is reasonable
because it provides an additional
method for Non-Professional Users to
access the NYSE National Integrated
Feed by providing the same data that is
available to Professional Users. The
proposed monthly Professional User Fee
(Per User) of $10 and monthly NonProfessional User Fee (Per User) of $1
are reasonable because they are
comparable to per user fees for the
NYSE American Integrated Feed. The
monthly Professional User Fee (Per
User) for the NYSE American Integrated
Feed is $10, and the monthly NonProfessional User Fee (Per User) for the
NYSE American Integrated Feed is $2.70
Non-Display Use Fees. The Exchange
believes the proposed Non-Display Use
fees are reasonable, because they reflect
the value of the data to the data
recipients in their profit-generating
activities and do not impose the burden
of counting non-display devices.
The Exchange believes that the
proposed Non-Display Use fees reflect
the significant value of the non-display
data use to data recipients, which
purchase such data on an entirely
voluntary basis. 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 a
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 recipients. The
Exchange believes that charging for nontrading uses is reasonable because data
recipients can derive substantial value
69 See Section 119(a) of Nasdaq BX Equity 7
Pricing Schedule.
70 See NYSE American LLC Equities Proprietary
Market Data Fees at https://www.nyse.com/
publicdocs/nyse/data/NYSE_American_Equities_
Market_Data_Fee_Schedule.pdf.
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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.
Previously, the non-display use data
pricing policies of many exchanges
required customers to count, and the
exchanges to audit the count of, the
number of non-display devices used by
a customer. As non-display use grew
more prevalent and varied, however,
exchanges received an increasing
number of complaints about the
impracticality and administrative
burden associated with that approach.
In response, the Exchange and its
affiliated exchanges developed a nondisplay use pricing structure that does
not require non-display devices to be
counted or those counts to be audited,
and instead looks merely at the three
following categories of potential use of
non-display data: Use of the data on the
customer’s own behalf (Category 1), use
on behalf of clients (Category 2), and use
to internally match buy and sell orders
within an organization (Category 3).
The Exchange believes that it is
reasonable to segment the fee for nondisplay use into these three categories.
As noted above, the uses to which
customers can put the NYSE National
Integrated Feed are numerous and
varied, and the Exchange believes that
charging separate fees for these separate
categories of use is reasonable because
it reflects the actual value the customer
derives from the data, based upon how
many categories of use the customer
makes of the data. Segmenting the fees
for non-display data in this way avoids
the unreasonable result of customers
that make only limited non-display use
of the data paying the same fees as
customers that use the data for
numerous different revenue-generating
and cost-saving purposes.
The Exchange believes that the
proposed fees of $5,000 per month for
each of Categories 1, 2, and 3 is
reasonable. These fees are comparable to
the NYSE American Integrated Feed fees
for non-display use for the different
categories of use, which is also $5,000
per category.71 The Exchange believes
that the proposed fees directly and
appropriately reflect the significant
value of using non-display data in a
wide range of computer-automated
functions relating to both trading and
non-trading activities and that the
number and range of these functions
continue to grow through innovation
and technology developments.
The Exchange also believes that,
regarding Category 3 fees, it is
71 See
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9855
reasonable to charge $5,000 per month
for each trading platform on which the
data recipient uses the Non-Display
data, because such use of the data is
directly in competition with the
Exchange and the Exchange should be
permitted to recoup some of its lost
trading revenue by charging for the data
that makes such competition possible.
The Exchange believes that it is
reasonable to cap such fees for Category
3 use at $15,000 per month per data
recipient, because a higher monthly fee
may potentially dissuade competitors
from buying the NYSE National
Integrated Feed for use by their trading
platforms.
The proposed Non-Display Use fees
for the NYSE National Integrated Feed
are also reasonable because they take
into account the extra value of receiving
the data for Non-Display Use on an
integrated basis. The Exchange believes
that the proposed fees directly and
appropriately reflect the significant
value of using the NYSE National
Integrated Feed on a non-display basis
in a wide range of computer-automated
functions relating to both trading and
non-trading activities and that the
number and range of these functions
continue to grow through innovation
and technology developments.72
Non-Display Use Declaration Late
Fee. The Exchange believes that it is
reasonable to require annual
submissions of the Non-Display Use
Declaration so that the Exchange will
have current and accurate information
about the use of the NYSE National
Integrated Feed and can correctly assess
fees for the uses of the NYSE National
Integrated Feed. Requiring annual
submissions of such declarations is
reasonable because it also allows users
to re-assess their own usage each year.
The Exchange believes that it is
reasonable to impose a late fee in
connection with the submission of the
Non-Display Use Declaration. In order
to correctly assess fees for the nondisplay use of the NYSE National
Integrated Feed, the Exchange needs to
have current and accurate information
about the use of the NYSE National
Integrated Feed. The failure of data
recipients to submit the Non-Display
72 See also Exchange Act Release No. 69157,
March 18, 2013, 78 FR 17946, 17949 (March 25,
2013) (SR–CTA/CQ–2013–01) (‘‘[D]ata feeds have
become more valuable, as recipients now use them
to perform a far larger array of non-display
functions. Some firms even base their business
models on the incorporation of data feeds into black
boxes and application programming interfaces that
apply trading algorithms to the data, but that do not
require widespread data access by the firm’s
employees. As a result, these firms pay little for
data usage beyond access fees, yet their data access
and usage is critical to their businesses.’’).
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Use Declaration on time leads to
potentially incorrect billing and
administrative burdens, including
tracking and obtaining late Non-Display
Use Declarations and correcting and
following up on payments owed in
connection with late Non-Display Use
Declarations. The purpose of the late fee
is to incent data recipients to submit the
Non-Display Use Declaration promptly
to avoid the administrative burdens
associated with the late submission of
Non-Display Use Declarations.
Multiple Data Feed Fee. The Exchange
believes that it is reasonable to require
data recipients to pay a modest
additional fee for taking a data feed for
a market data product in more than two
locations, because such data recipients
can derive substantial value from being
able to consume the product in as many
locations as they want. In addition,
there are administrative burdens
associated with tracking each location at
which a data recipient receives the
product. The Multiple Data Feed Fee is
designed to encourage data recipients to
better manage their requests for
additional data feeds and to monitor
their usage of data feeds. The proposed
fee is designed to apply to data feeds
received in more than two locations so
that each data recipient can have one
primary and one backup data location
before having to pay a multiple data
feed fee.
Fee Waiver for Federal Agencies. The
Exchange believes the proposal to not
charge the access fees, display fees for
professional users, and non-display fees
associated with its proprietary market
data products to customers that are
Federal agencies is reasonable because it
is designed to facilitate federal
government regulation without giving
an undue advantage to one set of
commercial users over another. The
Exchange believes that it is reasonable
to assess no fees to Federal agencies that
subscribe to the Exchange’s proprietary
market data products because Federal
agencies do not use the Exchange’s
proprietary market data for commercial
gain, but only for regulatory purposes.
One-Month Free Trial. The Exchange
believes the proposal to provide the
NYSE National Integrated Free 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
feed and determine whether it suits
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 BX
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offers new subscribers of BX TotalView
a 30-day waiver of user fees.73
For all of the foregoing reasons, the
Exchange believes that the proposed
fees for the NYSE National Integrated
Fee are reasonable.
The Proposed Fees Are Equitably
Allocated
The Exchange believes the proposed
fees for the NYSE National Integrated
Feed are allocated fairly and equitable
among the various categories of users of
the feed, and any differences among
categories of users are justified.
Overall. The Exchange believes that
the proposed fees are equitably
allocated because they will apply to all
data recipients that choose to subscribe
to the NYSE National Integrated Feed.
Any subscriber or vendor that chooses
to subscribe to the NYSE National
Integrated Feed is subject to the same
Fee Schedule, regardless of what type of
business they operate or the use they
plan to make of the data feed.
Subscribers and vendors may choose to
continue to receive some or all of the
data on the NYSE National Integrated
Feed through the existing separate feeds
for free, or they can choose to pay for
the NYSE National Integrated Feed in
order to receive integrated data, or they
or they can choose a combination of the
two approaches, thereby allowing each
vendor or subscriber to choose the best
business solution for itself.
Access Fee. The Exchange believes
the proposed monthly Access Fee of
$2,500 for the NYSE National Integrated
Feed is equitably allocated because it
would be charged on an equal basis to
all data recipients that receive a data
feed of the NYSE National Integrated
Feed, regardless of what type of
business they operate or the use they
plan to make of the data feed.
Redistribution Fees. The Exchange
believes the proposed monthly fee of
$1,500 for redistributing the NYSE
National Integrated Feed is equitably
allocated because it would be charged
on an equal basis to those vendors that
choose to redistribute the feed.
User Fees. The Exchange believes that
the fee structure differentiating
Professional User fees ($10 per month
per user) from Non-Professional User
fees ($1 per month per user) for display
device access to the NYSE National
Integrated Feed is equitable. This
structure has long been used by the
Exchange to reduce the price of data to
Non-Professional Users and make it
more broadly available.74 Offering the
73 See Section 123(a)(4) of Nasdaq BX’s Equity 7
Pricing Schedule.
74 See, e.g., Securities Exchange Act Release No.
59544 (March 9, 2009), 74 FR 11162 (March 16,
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NYSE National Integrated Feed to NonProfessional Users with the same data as
is available to Professional Users results
in greater equity among data recipients.
These user fees would be charged
uniformly to all display devices that
have access to the NYSE National
Integrated Feed.
Non-Display Use Fees. The Exchange
believes the proposed Non-Display Use
fees are equitably allocated because they
would require subscribers to pay fees
only for the uses they actually make of
the data. As noted above, non-display
data can be used by data recipients for
a wide variety of profit-generating
purposes (including trading, risk
management, and compliance) as well
as purposes that do not directly generate
revenues but nonetheless substantially
reduce the recipient’s costs by
automating certain functions. The
Exchange believes that it is equitable to
charge non-display data subscribers a
$5,000 fee for each category of use they
make of such data—namely, using the
data on their own behalf (Category 1),
on behalf of their clients (Category 2),
and to internally match buy and sell
orders within an organization (Category
3)—because this fee structure results in
subscribers with greater uses of the data
paying higher fees, and subscribers with
fewer uses of the data paying lower fees.
This segmented fee structure is also
equitable because no subscriber of nondisplay data would be charged a fee for
a category of use in which it did not
actually engage.
The Exchange also believes that,
regarding Category 3 fees, it is equitable
to charge $5,000 per month for each
trading platform on which the data
recipient uses the Non-Display data,
because such use of the data is directly
in competition with the Exchange and
the Exchange should be permitted to
recoup some of its lost trading revenue
by charging for the data that makes such
competition possible. The Exchange
believes that it is equitable to cap such
fees for Category 3 use at $15,000 per
month per data recipient, because a
higher monthly fee may potentially
dissuade competitors from buying the
NYSE National Integrated Feed for use
by their trading platforms.
Non-Display Use Declaration Late
Fee. The Exchange believes that the
proposed fee of $1,000 per month for a
late Non-Display Use Declaration is
equitably allocated because it applies to
2009) (SR–NYSE–2008–131) (establishing the $15
Non-Professional User Fee (Per User) for NYSE
OpenBook); Securities Exchange Act Release No.
20002, File No. S7–433 (July 22, 1983), 48 FR 34552
(July 29, 1983) (establishing Non-Professional fees
for CTA data); NASDAQ BX Equity 7 Pricing
Schedule, Section 123.
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any data recipient that pays an Access
Fee for the NYSE National Integrated
Feed but has failed to complete and
submit a Non-Display Use Declaration.
In addition, the Exchange believes that
it is equitable to charge a late fee to
subscribers who fail to timely submit
their Non-Display Use Declarations
because their failure to do so leads to
potentially incorrect billing and
administrative burdens on the part of
the Exchange. The Exchange believes it
is equitable to defray these
administrative costs by imposing a late
fee only on subscribers’ whose
declarations were late, as opposed to all
subscribers.
Multiple Data Feed Fee. The Exchange
believes that the $200 per month per
location fee to data recipients taking the
NYSE National Integrated Feed in more
than two locations is equitable because
it would apply to all such customers,
regardless of what type of business they
operate or the use they make of the data
feed. In addition, the Exchange believes
that it is equitable to charge a fee to
subscribers for taking a data feed in
more than two locations because there
are administrative burdens on the part
of the Exchange associated with tracking
each location at which a data recipient
receives the product. The Exchange
believes that it is equitable for it to
defray these administrative costs by
imposing a modest fee only on
subscribers who seek to take the feed in
more than two locations, as opposed to
all subscribers.
Fee Waiver for Federal Agencies. The
Exchange believes that the proposal to
not charge the access fees, display fees
for professional users, and non-display
fees associated with its proprietary
market data products to customers that
are Federal agencies is equitable
because it is designed to facilitate
federal government regulation without
giving an undue advantage to one set of
commercial users over another. The
Exchange believes that it is equitable to
waive fees for Federal agencies that
subscribe to the Exchange’s proprietary
market data products because Federal
agencies do not use the Exchange’s
proprietary market data for commercial
gain, but only for regulatory purposes.
One-Month Free Trial. The Exchange
believes the proposal to provide the
NYSE National Integrated Feed 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 of the NYSE National
Integrated Feed would not be charged
the Access Fee, Non-Display Fee, any
applicable Professional and Non-
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Professional User Fee, and
Redistribution Fee 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
the NYSE National Integrated Feed,
since customers who are current or
previous subscribers of the feed are
already familiar with it and whether it
suits their needs.
For all of the foregoing reasons, the
Exchange believes that the proposed
fees for the NYSE National Integrated
Fee are equitably allocated.
The Proposed Fees Are Not Unfairly
Discriminatory
The Exchange believes the proposed
fees for the NYSE National Integrated
Feed 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. The Exchange believes that
the proposed fees are not unfairly
discriminatory because they would
apply to all data recipients that choose
to subscribe to the NYSE National
Integrated Feed. Any vendor or
subscriber that chooses to subscribe to
the NYSE National Integrated Feed is
subject to the same Fee Schedule,
regardless of what type of business they
operate or the use they plan to make of
the data feed. Vendors and subscribers
may choose to continue to receive some
or all of the data on the NYSE National
Integrated Feed through the existing
separate feeds for free, or they can
choose to pay for the NYSE National
Integrated Feed in order to receive
integrated data, or they or they can
choose a combination of the two
approaches, thereby allowing each
vendor or subscriber to choose the best
business solution for itself.
Access Fee. The Exchange believes
the proposed monthly Access Fee of
$2,500 for the NYSE National Integrated
Feed is not unfairly discriminatory
because it would be charged on an equal
basis to all data recipients that receive
a data feed of the NYSE National
Integrated Feed, regardless of what type
of business they operate or the use they
plan to make of the data feed.
Redistribution Fees. The Exchange
believes the proposed monthly fee of
$1,500 for redistributing the NYSE
National Integrated Feed is not unfairly
discriminatory because it would be
charged on an equal basis to those
vendors that choose to redistribute the
feed.
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9857
User Fees. The Exchange believes that
the fee structure differentiating
Professional User fees ($10 per month
per user) from Non-Professional User
fees ($1 per month per user) for display
device access to the NYSE National
Integrated Feed is not unfairly
discriminatory. This structure has long
been used by the Exchange to reduce the
price of data to Non-Professional Users
and make it more broadly available.75
Offering the NYSE National Integrated
Feed to Non-Professional Users with the
same data as is available to Professional
Users results in greater equity among
data recipients. These user fees would
be charged uniformly to all display
devices that have access to the NYSE
National Integrated Feed.
Non-Display Use Fees. The Exchange
believes the proposed Non-Display Use
fees are not unfairly discriminatory
because they would require subscribers
for non-display use to pay fees only for
the categories of use they actually make
of the data. As noted above, non-display
data can be used by data recipients for
a wide variety of profit-generating
purposes (including trading, risk
management, and compliance) as well
as purposes that do not directly generate
revenues but nonetheless substantially
reduce the recipient’s costs by
automating certain functions. The
Exchange believes that it is not unfairly
discriminatory to charge non-display
data subscribers a $5,000 fee for each
category of use they make of such data—
namely, using the data on their own
behalf (Category 1), on behalf of their
clients (Category 2), and to internally
match buy and sell orders within an
organization (Category 3)—because this
fee structure results in subscribers with
greater uses for the data paying higher
fees, while subscribers with fewer uses
of the data pay lower fees. This
segmented fee structure is not unfairly
discriminatory because no subscriber of
non-display data would be charged a fee
for a category of use in which it did not
actually engage.
The Exchange also believes that,
regarding Category 3 fees, it is not
unreasonably discriminatory to charge
$5,000 per month for each trading
platform on which the data recipient
uses the Non-Display data, because such
use of the data is directly in competition
with the Exchange and the Exchange
75 See e.g., Securities Exchange Act Release No.
59544 (March 9, 2009), 74 FR 11162 (March 16,
2009) (SR–NYSE–2008–131) (establishing the $15
Non-Professional User Fee (Per User) for NYSE
OpenBook). See e.g., Securities Exchange Act
Release No. 20002, File No. S7–433 (July 22, 1983),
48 FR 34552 (July 29, 1983) (establishing
nonprofessional fees for CTA data); NASDAQ BX
Equity 7 Pricing Schedule, Section 123.
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should be permitted to recoup some of
its lost trading revenue by charging for
the data that makes such competition
possible. The Exchange believes that it
is not unreasonably discriminatory to
cap such fees for Category 3 use at
$15,000 per month per data recipient,
because a higher monthly fee may
potentially dissuade competitors from
buying the NYSE National Integrated
Feed for use by their trading platforms.
Non-Display Use Declaration Late
Fee. The Exchange believes that the
proposed fee of $1,000 per month for a
late Non-Display Use Declaration is not
unfairly discriminatory because it
applies to any data recipient that pays
an Access Fee for the NYSE National
Integrated Feed but has failed to
complete and submit a Non-Display Use
Declaration. In addition, the Exchange
believes that it is not unfairly
discriminatory to charge a late fee to
subscribers who fail to timely submit
their Non-Display Use Declarations
because their failure to do so leads to
potentially incorrect billing and
administrative burdens on the part of
the Exchange. Nor is it unfairly
discriminatory for the Exchange to
defray these administrative costs by
imposing a late fee only on subscribers’
whose declarations were late, as
opposed to all subscribers.
Multiple Data Feed Fee. The Exchange
believes that the $200 per month per
location fee to data recipients taking the
NYSE National Integrated Feed in more
than two locations is not unfairly
discriminatory because it would apply
to all such customers, regardless of what
type of business they operate or the use
they make of the data feed. In addition,
the Exchange believes that it is not
unfairly discriminatory to charge a fee
to subscribers for taking a data feed in
more than two locations because there
are administrative burdens on the part
of the Exchange associated with tracking
each location at which a data recipient
receives the product. The Exchange
believes that it is not unfairly
discriminatory for it to defray these
administrative costs by imposing a
modest fee only on subscribers who
seek to take the feed in more than two
locations, as opposed to all subscribers.
Fee Waiver for Federal Agencies. The
Exchange believes that the proposal to
not charge the access fees, display fees
for professional users, and non-display
fees associated with its proprietary
market data products to customers that
are Federal agencies is not unreasonably
discriminatory because it is designed to
facilitate federal government regulation
without giving an undue advantage to
one set of commercial users over
another. The Exchange believes that it is
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not unfairly discriminatory to waive
fees for Federal agencies that subscribe
to the Exchange’s proprietary market
data products because Federal agencies
do not use the Exchange’s proprietary
market data for commercial gain, but
only for regulatory purposes.
One-Month Free Trial. The Exchange
believes the proposal to provide the
NYSE National Integrated Feed to new
customers free-of-charge for their first
subscription month is not unfairly
discriminatory 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 of
the NYSE National Integrated Feed
would not be charged the Access Fee,
Non-Display Fee, any applicable
Professional and Non-Professional User
Fee, and Redistribution Fee for one
calendar month. The Exchange believes
it is not unfairly discriminatory to
restrict the availability of this onemonth free trial to customers that have
not previously subscribed to the NYSE
National Integrated Feed, since
customers who are current or previous
subscribers of the feed are already
familiar with it and whether it suits
their needs.
For all of the foregoing reasons, the
Exchange believes that the proposed
fees for the NYSE National Integrated
Fee are not unfairly discriminatory.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed fees 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 the NYSE
National Integrated Feed, and customers
may not only choose whether to
subscribe to the feed at all, but may
tailor their subscriptions by choosing
particular uses of the feed but not others
(e.g., Category 1 only versus all three
categories; display device access only
versus non-display use).
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
(e.g., Category 2 fees apply only to those
making non-display use on behalf of
clients; late fees apply only to customers
PO 00000
Frm 00138
Fmt 4703
Sfmt 4703
who fail to timely submit their
declarations), 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 from unfairly asking
subscribers to pay fees for services they
did not use, or late fees they did not
actually incur.
Intermarket Competition. The
Exchange believes that the proposed
fees do not impose a burden on
competition or on other SROs that is not
necessary or appropriate. As
demonstrated above and in Professor
Rysman’s attached [sic] paper,
exchanges are platforms for market data
and trading. In setting the proposed
fees, the Exchange was constrained by
the availability of numerous 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
for the NYSE National Integrated Feed,
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. Many other exchanges offer
proprietary data feeds like the NYSE
National Integrated Feed, supplying
depth of book order data, last sale data,
security status updates, stock summary
messages, and the exchange’s best bid
and offer at any given time, on a realtime basis. 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 platform, in
which case the platform would stand to
lose both market data and trading fees.
These competitive pressures ensure that
no one exchange’s market data fees can
impose an unnecessary burden on
E:\FR\FM\20FEN1.SGM
20FEN1
Federal Register / Vol. 85, No. 34 / Thursday, February 20, 2020 / Notices
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) 76 of the Act and
subparagraph (f)(2) of Rule 19b–4 77
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) 78 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NYSENAT–2020–05 on the subject line.
lotter on DSKBCFDHB2PROD with NOTICES
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–NYSENAT–2020–05. 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
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
78 15 U.S.C. 78s(b)(2)(B).
only one method. The Commission will
post all comments on the Commission’s
internet website (https://www.sec.gov/
rules/sro.shtml). Copies of the
submission, all subsequent
amendments, all written statements
with respect to the proposed rule
change that are filed with the
Commission, and all written
communications relating to the
proposed rule change between the
Commission and any person, other than
those that may be withheld from the
public in accordance with the
provisions of 5 U.S.C. 552, will be
available for website viewing and
printing in the Commission’s Public
Reference Room, 100 F Street NE,
Washington, DC 20549, on official
business days between the hours of
10:00 a.m. and 3:00 p.m. Copies of the
filing also will be available for
inspection and copying at the principal
office of the Exchange. All comments
received will be posted without change.
Persons submitting comments are
cautioned that we do not redact or edit
personal identifying information from
comment submissions. You should
submit only information that you wish
to make available publicly. All
submissions should refer to File
Number SR–NYSENAT–2020–05, and
should be submitted on or before March
12, 2020.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.79
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020–03411 Filed 2–19–20; 8:45 am]
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–88213; File No. SR–Phlx–
2020–03]
Self-Regulatory Organizations; Nasdaq
PHLX LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change To Relocate Rules From
Its Current Rulebook Into Its New
Rulebook Shell
February 14, 2020.
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 February
3, 2020, Nasdaq PHLX LLC (‘‘Phlx’’ or
‘‘Exchange’’) filed with the Securities
and Exchange Commission
(‘‘Commission’’) the proposed rule
79 17
77 17
1 15
VerDate Sep<11>2014
19:48 Feb 19, 2020
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
Jkt 250001
PO 00000
Frm 00139
Fmt 4703
change as described in Items I and II
below, which Items have been prepared
by the Exchange. The Commission is
publishing this notice to solicit
comments on the proposed rule change
from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to relocate
rules from its current Rulebook into its
new Rulebook shell.
The text of the proposed rule change
is available on the Exchange’s website at
https://nasdaqphlx.cchwallstreet.com/,
at the principal office of the Exchange,
and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
BILLING CODE 8011–01–P
76 15
9859
Sfmt 4703
The purpose of this rule change is to
relocate Phlx rules into the new
Rulebook shell with some amendments
to the shell.3 The Exchange has already
relocated options rules of its Affiliated
Exchanges so that it may harmonize its
rules, where applicable, across Nasdaq
markets. The relocation and
harmonization of the Phlx options rules
is part of the Exchange’s continued
effort to promote efficiency and
conformity of its processes with those of
its Affiliated Exchanges. The Exchange
believes that the placement of the Phlx
Rules into their new location in the
3 Previously, the Exchange added a shell structure
to its Rulebook with the purpose of improving
efficiency and readability and to align its rules
closer to those of its five sister exchanges, Nasdaq
BX, Inc.; Nasdaq PHLX LLC; The Nasdaq Stock
Market LLC; Nasdaq GEMX, LLC; and Nasdaq MRX,
LLC (‘‘Affiliated Exchanges’’). The shell structure
currently contains eight (8) Chapters which, once
complete, will apply a common set of rules to the
Affiliated Exchanges. See Securities Exchange Act
Release No. 82169 (November 29, 2017), 82 FR
57508 (December 5, 2017) (SR–Phlx–2017–97).
E:\FR\FM\20FEN1.SGM
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]]>Agencies
[Federal Register Volume 85, Number 34 (Thursday, February 20, 2020)]
[Notices]
[Pages 9847-9859]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-03411]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-88211; File No. SR-NYSENAT-2020-05]
Self-Regulatory Organizations; NYSE National, Inc.; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change To Establish
Fees for the NYSE National Integrated Feed
February 14, 2020.
Pursuant to Section 19(b)(1) \1\ of the Securities Exchange Act of
1934 (``Act''),\2\ and Rule 19b-4 thereunder,\3\ notice is hereby given
that on February 3, 2020, NYSE National, Inc. (``NYSE National'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II, and III below, which Items have been prepared by the
Exchange. The Commission is publishing this notice to solicit comments
on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 15 U.S.C. 78a.
\3\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to establish fees for the NYSE National
Integrated Feed. 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 adopt the NYSE National Proprietary Market
Data Fee Schedule (``Fee Schedule'') and establish the fees for the
NYSE National Integrated Feed that would be effective February 3,
2020.\4\
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\4\ The proposed rule change establishing the NYSE National
Integrated Feed was immediately effective on May 31, 2018. See
Securities Exchange Act Release No. 83350 (May 31, 2018), 83 FR
26332 (June 6, 2018) (SR-NYSENAT-2018-09) (``NYSE National
Integrated Feed Product Filing''). The NYSE National Integrated Feed
Product Filing also established the NYSE National BBO and NYSE
National Trades market data feeds.
---------------------------------------------------------------------------
In summary, the NYSE National Integrated Feed is a NYSE National-
only market data feed that provides vendors and subscribers on a real-
time basis with a unified view of events, in sequence, as they appear
on the NYSE National matching engine. The NYSE National Integrated Feed
includes depth-of-book order data, last sale data, security status
updates (e.g., trade corrections and trading halts), and stock summary
messages. Because the NYSE National Integrated Feed has a unified view
of events, in sequence, it also includes information about the
Exchange's best bid or offer at any given time.
The Exchange currently does not charge any fees for the NYSE
National Integrated Feed market data product.\5\
---------------------------------------------------------------------------
\5\ The Exchange also currently does not charge any fees for the
NYSE National BBO and NYSE National Trades market data products and
proposes to adopt rule text on the Fee Schedule to reflect that
there are no fees charged for NYSE National BBO and NYSE National
Trades market data products.
---------------------------------------------------------------------------
The Exchange initially filed to introduce fees for the NYSE
National Integrated Feed on December 4, 2019 (the ``Initial
Proposal'').\6\ Pursuant to the Initial Proposal, the fees would not be
implemented until February 3, 2020. The Initial Proposal was published
in the Federal Register and two comment letters were submitted in
response. The Initial Proposal was temporarily suspended pursuant to a
Suspension Order (the ``Initial Suspension Order'').\7\ The Initial
Suspension Order also instituted proceedings to determine whether to
approve or disapprove the Initial Proposal.
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 87797 (December 18,
2019), 84 FR 71025 (December 26, 2019).
\7\ See Securities Exchange Act Release No. 88109 (January 31,
2020) (SR-NYSENAT-2019-13) (``Initial Suspension Order'').
---------------------------------------------------------------------------
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.'' \8\
---------------------------------------------------------------------------
\8\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS Adopting Release'').
---------------------------------------------------------------------------
As the Commission itself recognized, the market for trading
services in NMS stocks has become ``more fragmented and competitive.''
\9\ Equity trading is currently dispersed across 13 exchanges,\10\ 31
alternative trading systems,\11\ and numerous broker-dealer
internalizers and wholesalers, all competing for order flow. Based on
publicly-available information, no single exchange has more than 18%
market share (whether including or excluding auction volume).\12\
---------------------------------------------------------------------------
\9\ 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'').
\10\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, available at https://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
\11\ 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.
\12\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, available at https://markets.cboe.com/us/equities/market_share/.
---------------------------------------------------------------------------
The recent growth of NYSE National's market share demonstrates this
competitive marketplace. Between February 2017 and mid-May 2018, NYSE
National was non-operational, and therefore had 0% of market share. On
May 21, 2018, NYSE National re-launched on its current platform as an
affiliated exchange of New York Stock Exchange, LLC (``NYSE''), NYSE
Arca, Inc. (``NYSE Arca, Inc.''), and NYSE American LLC (``NYSE
American''). Within four months, NYSE National began regularly
executing 1% of consolidated trading volume. By August 2019, NYSE
National began executing approximately 1.5% of consolidated trading
volume on a more regular basis. By October 2019, the Exchange had
[[Page 9848]]
1.9% market share of executed volume of equity trades.\13\
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\13\ See id.
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As NYSE National's transaction market share has increased, so has
the value of its market data. For example, in May 2018, when NYSE
National re-launched trading operations, the Exchange had 12 customers
for its NYSE National Integrated Feed. As NYSE National's market share
has increased, the number of subscribers of the NYSE National
Integrated Feed has steadily increased and as of November 2019, the
Exchange had 57 customers that subscribed to the NYSE National
Integrated Feed. In November 2019, customers of the NYSE National
Integrated Feed accounted for over 99% of the executed trade volume on
the Exchange.
On December 4, 2019, the Exchange filed the Initial Proposal to
introduce fees for the NYSE National Integrated Feed, effective
February 3, 2020. The Exchange explained in the Initial Proposal that
it filed its proposed rule change early, in December 2019, because the
Exchange believed it was appropriate to provide market participants
with early notice of the proposed changes, so that they could begin
determining whether the value of the NYSE National Integrated Feed to
their businesses is such that they would choose to continue using the
product once it was no longer provided for free. The Exchange explained
that it believes that market participants should have the opportunity
to begin such determinations before the Exchange begins charging fees.
Since the date of the Initial Proposal and before the proposed fees
went into effect, five subscribers to the NYSE National Integrated Feed
product (i.e., nearly nine percent of the prior subscriber base) have
canceled their subscriptions. In each instance, the subscriber told the
Exchange that its reason for cancelling its subscription was the
imminent imposition of fees. A sixth customer informed the Exchange
that if the Exchange is permitted to impose the fees, the customer will
cancel its subscription to the NYSE National Integrated Feed product
and instead subscribe to the NYSE National BBO feed, which will remain
available for free. These six lost subscribers constitute 10.5 percent
of the prior subscriber base.
Proposed NYSE National Integrated Feed Fees
To reflect the value of NYSE National's market data, as correlated
to the Exchange's increased transaction volume market share, the
Exchange proposes to establish the fees listed below for the NYSE
National Integrated Feed, operative on February 3, 2020. The Exchange
proposes to charge fees for the same categories of market data use as
its affiliated exchanges (namely, NYSE, NYSE Arca, and NYSE American)
currently charge. The Exchange believes that adopting the same fee
structure as its affiliated exchanges would reduce administrative
burdens on NYSE National market data subscribers that also currently
subscribe to market data feeds from NYSE, NYSE Arca, or NYSE American.
1. Access Fee. For the receipt of access to the NYSE National
Integrated Feed, the Exchange proposes to charge $2,500 per month. This
proposed Access Fee would be charged to any data recipient that
receives a data feed of the NYSE National Integrated Feed. Data
recipients that only use display devices to view NYSE National
Integrated Feed market data and do not separately receive a data feed
would not be charged an Access Fee. The proposed Access Fee is charged
only once per firm.
2. Redistribution Fee. For redistribution of the NYSE National
Integrated Feed, the Exchange proposes to establish a fee of $1,500 per
month. The proposed Redistribution Fee would be charged to any
Redistributors of the NYSE National Integrated Feed, which is defined
to mean a vendor or any person that provides a real-time NYSE National
market data product externally to a data recipient that is not its
affiliate or wholly-owned subsidiary, or to any system that an external
data recipient uses, irrespective of the means of transmission or
access. The proposed Redistribution Fee is charged only once per
Redistributor account.
3. User Fees. The Exchange proposes to charge a Professional User
Fee (Per User) of $10 per month and a Non-Professional User Fee (Per
User) of $1 per month. These user fees would apply to each display
device that has access to the NYSE National Integrated Feed.
4. Non-Display Use Fees. The Exchange proposes to establish non-
display fees for the NYSE National Integrated Feed that are based on
the non-display use categories charged by NYSE, NYSE Arca, NYSE
American, the Consolidated Tape Association, and the UTP Plan for non-
display use.\14\ Non-display use would mean accessing, processing, or
consuming the NYSE National Integrated Feed, delivered directly or
through a Redistributor, for a purpose other than in support of a data
recipient's display or further internal or external redistribution
(``Non-Display Use''). Non-Display Use would include trading uses such
as high frequency or algorithmic trading as well as any trading in any
asset class, automated order or quote generation and/or order pegging,
price referencing for algorithmic trading or smart order routing,
operations control programs, investment analysis, order verification,
surveillance programs, risk management, compliance, and portfolio
management.
---------------------------------------------------------------------------
\14\ See Endnote 1 to the NYSE Proprietary Market Data Fees,
available here: https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Fee_Schedule.pdf; Endnote 1 to the NYSE Arca
Equites Proprietary Market Data Fees, available here: https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Equities_Fee_Schedule.pdf; Endnote 1 to the NYSE American
LLC Equities Proprietary Market Data Fees, available here: https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Equities_Market_Data_Fee_Schedule.pdf; Endnote 8 to
the Schedule of Market Data Charges for the Consolidated Tape
Association, available here: https://www.ctaplan.com/publicdocs/ctaplan/notifications/trader-update/Schedule%20Of%20Market%20Data%20Charges%20-%20January%201,%202015.pdf; and Non-Display Usage Fees as set forth
in the UTP Plan Fee Schedule and Non-Display Policy, available here:
https://utpplan.com/DOC/Datapolicies.pdf. See, e.g., Securities
Exchange Act Release Nos. 69278 (April 2, 2013), 78 FR 20973 (April
8, 2013) (SR-NYSE-2013-25) and 72923 (Aug. 26, 2014), 79 FR 52079
(Sept. 2, 2014) (SR-NYSE-2014-43).
---------------------------------------------------------------------------
The Exchange proposes three categories of Non-Display Use of the
NYSE National Integrated Feed and related fees applicable to each
category. One, two, or three categories of Non-Display Use may apply to
a data recipient.
As proposed, the Category 1 Fee would be $5,000 per month
and would apply when a data recipient's Non-Display Use of the NYSE
National Integrated Feed is on its own behalf, not on behalf of its
clients.
As proposed, Category 2 Fees would be $5,000 per month and
would apply to a data recipient's Non-Display Use of the NYSE National
Integrated Feed on behalf of its clients.
As proposed, Category 3 Fees would be $5,000 per month and
would apply to a data recipient's Non-Display Use of the NYSE National
Integrated Feed for the purpose of internally matching buy and sell
orders within an organization, including matching customer orders for a
data recipient's own behalf and/or on behalf of its clients. This
category would apply to Non-Display Use in trading platforms, such as,
but not restricted to, alternative trading systems (``ATSs''), broker
crossing networks, broker crossing systems not filed as ATSs, dark
pools,
[[Page 9849]]
multilateral trading facilities, exchanges and systematic
internalization systems. A data recipient will be charged $5,000 per
month for each platform on which it uses the Non-Display data
internally to match buy and sell orders, up to a cap of $15,000 per
month; even if the data recipient uses the NYSE National Integrated
Feed for more than three platforms, it will not pay more than $15,000
for such Category 3 use per month.
The Exchange proposes to adopt the description of the three non-
display use categories in the Fee Schedule in proposed endnote 1 on the
Fee Schedule.\15\
---------------------------------------------------------------------------
\15\ See Fee Schedule, proposed endnote 1.
---------------------------------------------------------------------------
Data recipients that receive the NYSE National Integrated Feed for
Non-Display Use would be required to complete and submit a Non-Display
Use Declaration before they would be authorized to receive the feed. A
firm subject to Category 3 Fees would be required to identify each
platform that uses the NYSE National Integrated Feed for a Category 3
Non-Display Use basis, such as ATSs and broker crossing systems not
registered as ATSs, as part of the Non-Display Use Declaration.
5. Non-Display Use Declaration Late Fee. Data recipients that
receive the NYSE National Integrated Feed for Non-Display Use would be
required to complete and submit a Non-Display Use Declaration before
they would be authorized to receive the feed. NYSE National Integrated
Feed data recipients would be required to submit, by December 31 of
each year, the Non-Display Use Declaration. The requirement to submit a
Non-Display Use Declaration would apply to all real-time NYSE National
data feed product recipients. The Exchange proposes to charge a Non-
Display Use Declaration Late Fee of $1,000 per month to any data
recipient that pays an Access Fee for the NYSE National Integrated Feed
that has failed to timely complete and submit a Non-Display Use
Declaration. Specifically, with respect to the Non-Display Use
Declaration due by December 31 of each year, the Non-Display Use
Declaration Late Fee would apply to data recipients that fail to
complete and submit the Non-Display Use Declaration by the December 31
due date, and would apply beginning January 1 and for each month
thereafter until the data recipient has completed and submitted the
annual Non-Display Use Declaration.
The proposed Non-Display Use Declaration Late Fee would be set
forth in endnote 2 on the Fee Schedule. Proposed endnote 2 would
provide that a data recipient that pays an Access Fee and that fails to
timely complete and submit a Non-Display Use Declaration must pay the
Non-Display Use Declaration Late Fee.\16\ Proposed endnote 2 to the Fee
Schedule would also provide that the annual Non-Display Use Declaration
would be due by December 31 of each year. Finally, proposed endnote 2
would provide that the Non-Display Use Declaration Late Fee would apply
to data recipients that fail to complete and submit the annual Non-
Display Use Declaration by the December 31 due date, and would apply
beginning January 1 of each year and for each month thereafter until
the data recipient has completed and submitted the annual Non-Display
Use Declaration.
---------------------------------------------------------------------------
\16\ See Fee Schedule, proposed endnote 2.
---------------------------------------------------------------------------
In addition, if a data recipient's use of the NYSE National
Integrated Feed data changes at any time after the data recipient
submits a Non-Display Use Declaration, the data recipient must inform
the Exchange of the change by completing and submitting at the time of
the change an updated declaration reflecting the change of use.
6. Multiple Data Feed Fee. The Exchange proposes to establish a
monthly fee, the ``Multiple Data Feed Fee,'' that would apply to data
recipients that take a data feed for a market data product in more than
two locations. Data recipients taking the NYSE National Integrated Feed
in more than two locations would be charged $200 per additional
location per month. No new reporting would be required.\17\
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\17\ Data vendors currently report a unique Vendor Account
Number for each location at which they provide a data feed to a data
recipient. The Exchange considers each Vendor Account Number a
location. For example, if a data recipient has five Vendor Account
Numbers, representing five locations, for the receipt of the NYSE
National Integrated Feed product, that data recipient will pay the
Multiple Data Feed fee with respect to three of the five locations.
---------------------------------------------------------------------------
7. Fee Waiver for Federal Agencies. The Exchange proposes to adopt
rule text in the Fee Schedule with respect to Federal agencies that
subscribe to the NYSE National Integrated Feed. The proposed rule would
provide that market data fees would not apply to any Federal agency for
their use of NYSE National real-time proprietary market data products.
The term ``Federal agency'' as used in the Fee Schedule would include
all Federal agencies subject to the Federal Acquisition Regulation
(FAR),\18\ as well as any Federal agency not subject to FAR that has
promulgated its own procurement rules.\19\ More specifically, the
Exchange proposes to specify that access fees, professional user fees
and non-display fees would not apply to Federal agencies for those
products to which those fees apply.\20\ The proposed fee waiver is
designed to allow the Exchange to provide Federal agencies with NYSE
National real-time proprietary market data products at no cost in
support of Federal agencies' regulatory responsibilities. With the
adoption of the proposed fee waiver, the Exchange is not waiving any
other contractual rights, and all Federal agencies that subscribe to
NYSE National real-time proprietary market data products will be
required to execute the appropriate subscriber agreement, which
includes, among other things, provisions against the redistribution of
data.
---------------------------------------------------------------------------
\18\ FAR is the principal set of rules governing the process by
which the U.S. federal government purchases goods and services.
\19\ See 48 CFR 2.101. FAR defines ``Federal agency'' as ``any
executive agency or any independent establishment in the legislative
or judicial branch of the Government (except the Senate, the House
of Representatives, the Architect of the Capitol, and any activities
under the Architect's direction).'' ``Executive agency'' is defined
as ``an executive department, a military department, or any
independent establishment within the meaning of 5 U.S.C. 101, 102,
and 104(1), respectively, and any wholly owned Government
corporation within the meaning of 31 U.S.C. 9101.''
\20\ Currently, pursuant to this proposed rule change, the NYSE
National Integrated Feed is the only product to which fees would
apply.
---------------------------------------------------------------------------
8. One-Month Free Trial. Finally, the Exchange proposes a one-month
free trial for any firm that subscribes to a particular NYSE National
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 National market data product listed on the Fee
Schedule. As proposed, a first-time subscriber of a particular NYSE
National 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 National BBO for free
would be eligible to receive a free one-month trial of the NYSE
National Integrated Feed, whether in a display-only format or for non-
display use. On the other hand, if a firm pays an Access Fee and
receives the NYSE National Integrated Feed for non-display use, it
would not be eligible to receive a free one-month trial of the NYSE
National Integrated Feed in a display-only format (or vice-versa). 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 National
[[Page 9850]]
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
National market data products listed on the Fee Schedule would enable
potential subscribers to determine whether a particular NYSE National
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.
Application of Proposed Fees
The Exchange is not required to make the NYSE National Integrated
Feed available or to offer any specific pricing alternatives to any
customers, nor is any firm required to purchase the NYSE National
Integrated Feed. Firms that choose to purchase the NYSE National
Integrated Feed do so for the primary goals of using it to increase
their revenues, reduce their expenses, and in some instances to compete
directly with the Exchange (including for order flow). Those firms are
able to determine for themselves whether or not the NYSE National
Integrated Feed or any other similar products are attractively priced.
The Exchange produces and disseminates the NYSE National Integrated
Feed as part of its market data offerings to support its transaction
execution services. Since May 2018, when NYSE National relaunched
trading, the Exchange has observed a direct correlation between the
steady increase of subscribers to the NYSE National Integrated Feed and
the increase in the Exchange's transaction market share volume over the
same period.
Based on the reported usage of the NYSE National Integrated Feed,
the Exchange believes that its data subscribers use the order-by-order
detail information available in this market data product to make
trading decisions that directly benefit the transaction services that
the Exchange offers. Specifically, in the period before the Initial
Proposal was published, subscribers of the NYSE National Integrated
Feed represented firms that provided over 99% of the Exchange's
executed transaction volume. More than half of the feed's subscribers
overall (i.e., 34 of 57) reported ``Category 1'' non-display use of the
NYSE National Integrated Feed, which means that they used the data for
trading on their own behalf. This figure confirms that a substantial
portion of the NYSE National Integrated Feed's subscribers analyzed
whether it was in their business interest to use the feed for their own
trading, and concluded that it was.
The Exchange determined the level of the fees to charge for the
NYSE National Integrated Feed based on the value of the Exchange's
transaction services. As noted above, over an 18-month period, NYSE
National has grown from 0% to nearly 2% market share of consolidated
trading volume. During that same period, the Exchange has had a steady
increase in the number of subscribers to the NYSE National Integrated
feed.
The proposed fee structure is not novel as it is based on the fee
structure currently in place for the NYSE American Integrated Feed.\21\
Both NYSE American and NYSE National trade all NMS Stocks. As noted
above, in October 2019, NYSE National had 1.9% market share; for that
same month, NYSE American had 0.29% market share.\22\ Even though NYSE
National's market share is several times higher than NYSE American's,
the Exchange is proposing fees for the NYSE National Integrated Feed
that are based on the existing fee structure and rates that data
recipients already pay for the NYSE American Integrated Feed.
Specifically, the fees for the NYSE American Integrated Feed--which
like the NYSE National Integrated Feed, includes top of book, depth of
book, trades, and security status messages--consist of an Access Fee of
$2,500 per month, a Professional User Fee (Per User) of $10 per month,
a Non-Professional User Fee (Per User) of $2 per month, Non-Display
Fees of $5,000 per month for each of Categories 1, 2 and 3, and a
Redistribution Fee of $1,500 per month. NYSE American also charges a
Non-Display Use Declaration Late Fee of $1,000 per month and a Multiple
Data Feed Fee of $200 per month.\23\
---------------------------------------------------------------------------
\21\ See Securities Exchange Act Release Nos. 76525 (November
25, 2015), 80 FR 75148 (December 1, 2015) (SR-NYSEMKT-2015-95)
(Notice of filing and immediate effectiveness of proposed rule
change to establish fees for NYSE MKT Integrated Feed), and 76975
(January 26, 2016), 81 FR 5139 (February 1, 2016) (SR-NYSEMKT-2016-
11) (Notice of filing and immediate effectiveness of proposed rule
change amending the fees for NYSE MKT Integrated Feed to add a
Multiple Data Feed Fee).
\22\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, available at https://markets.cboe.com/us/equities/market_share/.
\23\ See NYSE American LLC Equities Proprietary Market Data Fees
at https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Equities_Market_Data_Fee_Schedule.pdf.
---------------------------------------------------------------------------
In the Initial Proposal, the Exchange noted that each of the then-
current subscribers to the NYSE National Integrated Feed would be
impacted by the proposed rule change, and that the scope of the fee
impact for each data recipient would depend on that data recipient's
use of the data. The Exchange noted that, based on current usage, at
least 34 firms would be subject to Category 1 Non-Display Use fees, at
least 14 firms would be subject to Category 2 Non-Display Use fees, and
at least 10 firms would be subject to Category 3 Non-Display Use fees.
The Exchange further explained that, because the NYSE National
Integrated Feed had not been previously been subject to fees, the
Exchange did not know the full impact of the proposed fees on current
data recipients because subscribers may choose to reduce or eliminate
their use of data. The Exchange stated that it anticipated that there
might be data recipients of the NYSE National Integrated Feed that
subscribed only because it was free and might choose to discontinue
using the product once the fees were implemented. The Exchange noted
that a data recipient that chooses to discontinue the NYSE National
Integrated Feed may also choose to shift order flow away from the
Exchange, and that, given the current competitive environment, if data
recipients were to both discontinue the product and shift order flow
away from the Exchange, the Exchange would reevaluate the fees and
potentially file a separate proposed rule change to amend its fees. The
Exchange explained that in advance of implementing the proposed fees,
however, the Exchange could not estimate with precision the impact of
the proposed fees on the Exchange's transaction services business or
the number of NYSE National Integrated Feed subscribers.
Since the Initial Proposal became publicly known on December 4,
2019, five subscribers to the NYSE National Integrated Feed product
have canceled their subscriptions. In each instance, the subscriber
told the Exchange that the reason for ending its subscription was the
imminent imposition of fees. A sixth customer informed the Exchange
that if the Exchange is permitted to impose the fees, the customer will
cancel its subscription to the NYSE National Integrated Feed product
and instead subscribe to the NYSE National BBO feed, which will remain
available for free.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with
[[Page 9851]]
the provisions of Section 6 of the Act,\24\ in general, and Sections
6(b)(4) and 6(b)(5) of the Act,\25\ 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.
---------------------------------------------------------------------------
\24\ 15 U.S.C. 78f(b).
\25\ 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.'' \26\
---------------------------------------------------------------------------
\26\ 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.'' \27\
---------------------------------------------------------------------------
\27\ 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.' '' \28\
---------------------------------------------------------------------------
\28\ Id. at 535.
---------------------------------------------------------------------------
In this competitive marketplace, the Exchange's executed trading
volume has grown from 0% market share to nearly 2% market share in less
than two years and the Exchange believes that it is reasonable to begin
charging fees for the NYSE National Integrated Feed.
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 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.\29\ Among other things, Professor Jones concluded that:
---------------------------------------------------------------------------
\29\ See Exhibit 3A, Charles M. Jones, Understanding the Market
for U.S. Equity Market Data, August 31, 2018 (hereinafter ``Jones
Paper'').
---------------------------------------------------------------------------
``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 [as NYSE National has done with its Integrated
Feed] by offering their proprietary market data products for free for
some period of time.'' \30\
---------------------------------------------------------------------------
\30\ Id. 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.'' \31\
---------------------------------------------------------------------------
\31\ 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.'' \32\
---------------------------------------------------------------------------
\32\ 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.'' \33\
---------------------------------------------------------------------------
\33\ 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,
[again, as NYSE National has done with its Integrated Feed] serving as
a check on pricing by more established exchanges. These are all the
standard hallmarks of a competitive market.'' \34\
---------------------------------------------------------------------------
\34\ 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. When the platform theory of competition applies, an exchange
is not additionally required to demonstrate that there is a substitute
for the specific market data product at issue, because the relevant
question is whether a constraint on fees exists, not the specific
mechanism of constraint.
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.'' \35\ 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
[[Page 9852]]
account for the influence of the other sides. As the Supreme Court
explained:
---------------------------------------------------------------------------
\35\ 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.\36\
---------------------------------------------------------------------------
\36\ 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 publicly 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 at 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.\37\ 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 its 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 similar to the NYSE National Integrated Feed that is the
subject of this fee filing.\38\
---------------------------------------------------------------------------
\37\ See Exhibit 3B, Marc Rysman, Stock Exchanges as Platforms
for Data and Trading, December 2, 2019 (hereinafter ``Rysman
Paper''), ] 6.
\38\ 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.\39\ 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.\40\ This is the sort of
externality that is a key characteristic of a platform market.\41\
---------------------------------------------------------------------------
\39\ Rysman Paper ]] 80-90.
\40\ Id. ]] 91-93.
\41\ Id. ] 91.
---------------------------------------------------------------------------
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.'' \42\
---------------------------------------------------------------------------
\42\ Id. ] 95.
---------------------------------------------------------------------------
``[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.'' \43\
---------------------------------------------------------------------------
\43\ 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.''
\44\
---------------------------------------------------------------------------
\44\ Id.
---------------------------------------------------------------------------
``[E]mpirical evidence confirms that stock exchanges are
platforms for data and trading.'' \45\
---------------------------------------------------------------------------
\45\ 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.'' \46\
---------------------------------------------------------------------------
\46\ Id. ] 98.
---------------------------------------------------------------------------
``Competition is properly understood as being between
platforms (i.e., stock exchanges) that balance the needs of consumers
of data and traders.'' \47\
---------------------------------------------------------------------------
\47\ Id.
---------------------------------------------------------------------------
``Data fees, data use, trading fees, and order flow are
all interrelated.'' \48\
---------------------------------------------------------------------------
\48\ Id.
---------------------------------------------------------------------------
``Competition for order flow can discipline the pricing of
market data, and vice-versa.'' \49\
---------------------------------------------------------------------------
\49\ Id.
---------------------------------------------------------------------------
``As with platforms generally, overall competition between
exchanges will limit their overall profitability, not margins on any
particular side of the platform.'' \50\
---------------------------------------------------------------------------
\50\ Id. ] 100.
---------------------------------------------------------------------------
The Exchange has observed a similar correlation in connection with
its offering of the NYSE National Integrated Feed. Since May 2018, when
the Exchange re-launched trading, the number of subscribers of the NYSE
National Integrated Feed grew from 12 to a high of 57. Over this same
period, the Exchange has increased market share from 0% to nearly 2%.
The Exchange therefore believes that its proposed fees for the NYSE
National Integrated Feed are subject to platform-based competitive
constraints on pricing.
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. As the D.C. Circuit recognized in NetCoalition I, ``[n]o
one disputes that competition for order flow is fierce.'' \51\ 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.'' \52\
---------------------------------------------------------------------------
\51\ NetCoalition I, 615 F.3d at 544 (internal quotation
omitted).
\52\ Id.
---------------------------------------------------------------------------
[[Page 9853]]
Similarly, the Commission itself has recognized that the market for
trading services in NMS stocks has become ``more fragmented and
competitive.'' \53\ 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.'' \54\ Indeed, today, equity
trading is currently dispersed across 13 exchanges,\55\ 31 alternative
trading systems,\56\ and numerous broker-dealer internalizers and
wholesalers, all competing for order flow. Based on publicly-available
information, no single exchange has more than 18% market share.\57\
---------------------------------------------------------------------------
\53\ See Securities Exchange Act Release No. 51808, 84 FR 5202,
5253 (February 20, 2019) (File No. S7-05-18).
\54\ 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.
\55\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, available at https://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
\56\ 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.
\57\ See Cboe Global Markets U.S. Equities Market Volume
Summary, available at https://markets.cboe.com/us/equities/market_share/.
---------------------------------------------------------------------------
Further, low barriers to entry mean that new exchanges may rapidly
and inexpensively enter the market and offer additional substitute
platforms to compete with the Exchange.\58\ 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; \59\
Members Exchange (MEMX), which has recently filed its application to be
approved as a registered equities exchange; \60\ and Miami
International Holdings (MIAX), which has announced its plan to
introduce equities trading on an existing registered options
exchange.\61\
---------------------------------------------------------------------------
\58\ See Jones Paper at 10-11.
\59\ 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).
\60\ 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).
\61\ 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.\62\ 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.\63\ 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.
---------------------------------------------------------------------------
\62\ Rysman Paper ] 98.
\63\ 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 here in setting its fees for the NYSE National
Integrated Feed.
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 setting fees for the NYSE National Integrated
Feed, the Exchange is constrained by the fact that, if its pricing
across the platform is unattractive to customers, customers 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 in which it operates as a
platform.
d. NYSE National Integrated Feed Is an Optional Market Data Product
Subscribing to the NYSE National Integrated Feed is entirely
optional. The Exchange is not required to make the NYSE National
Integrated Feed available to any customers, nor is any customer
required to purchase the NYSE National Integrated Feed. 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,\64\ a customer's decision whether to
purchase the NYSE National Integrated Feed is entirely discretionary.
Most firms that choose to subscribe to the NYSE National Integrated
Feed do so for the primary goals of using it to increase their
revenues, reduce their expenses, and in some instances to compete
directly with the Exchange for order flow. Such firms are able to
determine for themselves whether the NYSE National Integrated Feed is
necessary for their business needs, and if so, whether or not it is
attractively priced. If the NYSE National Integrated Feed does 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 NYSE National Integrated
Feed.\65\ If they do not choose to use the NYSE National Integrated
Feed, they could also choose not to direct order flow to the Exchange.
---------------------------------------------------------------------------
\64\ 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.
\65\ See generally Jones Paper at 8, 10-11.
---------------------------------------------------------------------------
As noted above, the current subscribers to the NYSE National
Integrated Feed began changing their behavior in response to the
potential imposition of fees as set out in the Initial Proposal and
herein. Since the Initial Proposal became publicly known on December 4,
2019, five subscribers to the NYSE National Integrated Feed product
have canceled their subscriptions even before the fees go into effect.
In each instance, the subscriber told the Exchange that the reason for
ending its subscription was the imminent imposition of fees. These
cancellations are evidence that
[[Page 9854]]
subscribing to the NYSE National Integrated Feed is discretionary, that
each customer makes the decision whether to subscribe based on its own
analysis of the benefits and costs to itself, and that customers can
and do make those decisions quickly based on reactions to fee changes.
But even if such firms determine that the fees for NYSE National
Integrated Feed are too high, customers can access much of the same
data on the NYSE National Integrated Feed for free by subscribing to
the NYSE National BBO feed (which includes best-bid-and-offer
information for NYSE National on a real-time basis) and NYSE National
Trades (which includes last-sale information on a real-time basis),
both of which are offered at no cost. NYSE National top-of-book
quotation information and last-sale information is also available on
the consolidated SIP feeds. In this way, the NYSE National BBO, NYSE
National Trades, and SIP data products are all substitutes for a
significant portion of the data available on the NYSE National
Integrated Feed. Indeed, as already noted, after the Initial Proposal
was made public, a sixth customer informed the Exchange that if the
Exchange is permitted to impose the fees as proposed, the customer will
drop its subscription to the NYSE National Integrated Feed product and
instead subscribe to the NYSE National BBO feed, which will remain
available for free. This is clear evidence that the availability of
these substitute products constrains the Exchange's ability to charge
supracompetitive prices for the NYSE National Integrated Feed.
The only content available on NYSE National Integrated Feed that is
not available on these other products is the order-by-order look at the
NYSE National book, which provides information about depth of book on
the Exchange. The Exchange has been a vocal advocate for the creation
of a ``SIP Premium'' product that would include depth-of-book
information on the consolidated market data feeds.\66\ Future products
such as SIP Premium would include not only integrated depth-of-book
information from NYSE National, but all other exchanges as well, and
would further constrain the Exchange's ability to price NYSE National
Integrated Feed at a supracompetitive price.
---------------------------------------------------------------------------
\66\ See NYSE, ``Stock Quotes and Trade Data: One Size Doesn't
Fit All'' (August 22, 2019), posted at https://www.nyse.com/equities-insights#20190822.
---------------------------------------------------------------------------
Further, 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 redistributes the NYSE National Integrated
Feed. Even in the absence of fees for the NYSE National Integrated
Feed, vendors have not elected to make available the NYSE National
Integrated Feed and likely will not unless their customers request it,
and customers will not elect to pay the proposed fees unless the NYSE
National Integrated Feed 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.
In setting the proposed fees for the NYSE National Integrated Feed,
the Exchange considered the competitiveness of the market for
proprietary data and all of the implications of that competition. The
Exchange believes that it has considered all relevant factors and has
not considered irrelevant factors in order to establish reasonable
fees. The existence of alternatives to the Exchange's platform and the
continued availability of the Exchange's separate data feeds for free
ensure 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 the NYSE National
Integrated Feed are reasonable for the following additional reasons.
Overall. The Exchange believes that the proposed fees for the NYSE
National Integrated Feed are reasonable because they represent not only
the value of the data available from the NYSE National BBO and NYSE
National Trades data feeds but also the value of receiving the data on
an integrated basis. Receiving the data on an integrated basis provides
greater efficiencies and reduced errors for vendors and subscribers
that currently choose to integrate the data themselves after receiving
it from the Exchange. Some vendors and subscribers may not have the
technology or resources to integrate separate data feeds in a timely
and/or efficient manner, and thus the integration feature of the
product may be valuable to them.
The Exchange believes the proposed fees for the NYSE National
Integrated Feed are also reasonable when compared to fees for
comparable products, such as the NYSE American Integrated Feed.\67\
Even though NYSE National's market share is several times higher than
NYSE American's, the Exchange is proposing fees for the NYSE National
Integrated Feed that are based on the existing fee structure and rates
that data recipients already pay for the NYSE American Integrated Feed.
The Exchange believes that adopting the same fee structure as its
affiliated exchanges would reduce administrative burdens on NYSE
National data subscribers that also currently subscribe to market data
feeds from NYSE, NYSE Arca, or NYSE American.
---------------------------------------------------------------------------
\67\ See NYSE American Integrated Feed, https://www.nyse.com/market-data/real-time/integrated-feed.
---------------------------------------------------------------------------
Access Fee. The Exchange believes that is reasonable to charge
access fees because of the value of the data to data recipients in
their profit-generating activities. The Exchange believes that the
proposed monthly Access Fee of $2,500 for the NYSE National Integrated
Feed is reasonable because it is comparable to the monthly access fee
for the NYSE American Integrated Feed, which is also $2,500.\68\
---------------------------------------------------------------------------
\68\ See NYSE American LLC Equities Proprietary Market Data Fees
at https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Equities_Market_Data_Fee_Schedule.pdf.
---------------------------------------------------------------------------
Redistribution Fees. The Exchange believes that it is reasonable to
charge redistribution fees because vendors receive value from
redistributing the data in their business products for their customers.
The Exchange believes that charging a Redistribution Fee is reasonable
because the vendors that would be charged such a fee profit by re-
transmitting the Exchange's market data to their customers. This fee
would be charged only once per month to each vendor account that
redistributes the NYSE National Integrated Feed, regardless of the
number of customers to which that vendor redistributes the data.
Currently, there is only one vendor that redistributes the NYSE
National Integrated Feed. Accordingly, this proposed fee would have
limited impact. The Exchange believes the proposed monthly
Redistribution Fee of $1,500 for the NYSE National Integrated Feed is
reasonable because it is comparable to the monthly Redistribution Fee
for NYSE American Integrated Feed, which is also $1,500, and the
monthly External Distributor
[[Page 9855]]
Fee for Nasdaq BX, Inc.'s (``Nasdaq BX'') BX TotalView Product, which
is also $1,500.\69\
---------------------------------------------------------------------------
\69\ See Section 119(a) of Nasdaq BX Equity 7 Pricing Schedule.
---------------------------------------------------------------------------
User Fees. The Exchange believes that having separate Professional
and Non-Professional User fees for the NYSE National Integrated Feed is
reasonable because it will make the product more affordable and result
in greater availability to Professional and Non-Professional Users.
Setting a modest Non-Professional User fee is reasonable because it
provides an additional method for Non-Professional Users to access the
NYSE National Integrated Feed by providing the same data that is
available to Professional Users. The proposed monthly Professional User
Fee (Per User) of $10 and monthly Non-Professional User Fee (Per User)
of $1 are reasonable because they are comparable to per user fees for
the NYSE American Integrated Feed. The monthly Professional User Fee
(Per User) for the NYSE American Integrated Feed is $10, and the
monthly Non-Professional User Fee (Per User) for the NYSE American
Integrated Feed is $2.\70\
---------------------------------------------------------------------------
\70\ See NYSE American LLC Equities Proprietary Market Data Fees
at https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Equities_Market_Data_Fee_Schedule.pdf.
---------------------------------------------------------------------------
Non-Display Use Fees. The Exchange believes the proposed Non-
Display Use fees are reasonable, because they reflect the value of the
data to the data recipients in their profit-generating activities and
do not impose the burden of counting non-display devices.
The Exchange believes that the proposed Non-Display Use fees
reflect the significant value of the non-display data use to data
recipients, which purchase such data on an entirely voluntary basis.
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 a 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 recipients. The Exchange
believes that charging for non-trading uses is reasonable 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.
Previously, the non-display use data pricing policies of many
exchanges required customers to count, and the exchanges to audit the
count of, the number of non-display devices used by a customer. As non-
display use grew more prevalent and varied, however, exchanges received
an increasing number of complaints about the impracticality and
administrative burden associated with that approach. In response, the
Exchange and its affiliated exchanges developed a non-display use
pricing structure that does not require non-display devices to be
counted or those counts to be audited, and instead looks merely at the
three following categories of potential use of non-display data: Use of
the data on the customer's own behalf (Category 1), use on behalf of
clients (Category 2), and use to internally match buy and sell orders
within an organization (Category 3).
The Exchange believes that it is reasonable to segment the fee for
non-display use into these three categories. As noted above, the uses
to which customers can put the NYSE National Integrated Feed are
numerous and varied, and the Exchange believes that charging separate
fees for these separate categories of use is reasonable because it
reflects the actual value the customer derives from the data, based
upon how many categories of use the customer makes of the data.
Segmenting the fees for non-display data in this way avoids the
unreasonable result of customers that make only limited non-display use
of the data paying the same fees as customers that use the data for
numerous different revenue-generating and cost-saving purposes.
The Exchange believes that the proposed fees of $5,000 per month
for each of Categories 1, 2, and 3 is reasonable. These fees are
comparable to the NYSE American Integrated Feed fees for non-display
use for the different categories of use, which is also $5,000 per
category.\71\ The Exchange believes that the proposed fees directly and
appropriately reflect the significant value of using non-display data
in a wide range of computer-automated functions relating to both
trading and non-trading activities and that the number and range of
these functions continue to grow through innovation and technology
developments.
---------------------------------------------------------------------------
\71\ See id.
---------------------------------------------------------------------------
The Exchange also believes that, regarding Category 3 fees, it is
reasonable to charge $5,000 per month for each trading platform on
which the data recipient uses the Non-Display data, because such use of
the data is directly in competition with the Exchange and the Exchange
should be permitted to recoup some of its lost trading revenue by
charging for the data that makes such competition possible. The
Exchange believes that it is reasonable to cap such fees for Category 3
use at $15,000 per month per data recipient, because a higher monthly
fee may potentially dissuade competitors from buying the NYSE National
Integrated Feed for use by their trading platforms.
The proposed Non-Display Use fees for the NYSE National Integrated
Feed are also reasonable because they take into account the extra value
of receiving the data for Non-Display Use on an integrated basis. The
Exchange believes that the proposed fees directly and appropriately
reflect the significant value of using the NYSE National Integrated
Feed on a non-display basis in a wide range of computer-automated
functions relating to both trading and non-trading activities and that
the number and range of these functions continue to grow through
innovation and technology developments.\72\
---------------------------------------------------------------------------
\72\ See also Exchange Act Release No. 69157, March 18, 2013, 78
FR 17946, 17949 (March 25, 2013) (SR-CTA/CQ-2013-01) (``[D]ata feeds
have become more valuable, as recipients now use them to perform a
far larger array of non-display functions. Some firms even base
their business models on the incorporation of data feeds into black
boxes and application programming interfaces that apply trading
algorithms to the data, but that do not require widespread data
access by the firm's employees. As a result, these firms pay little
for data usage beyond access fees, yet their data access and usage
is critical to their businesses.'').
---------------------------------------------------------------------------
Non-Display Use Declaration Late Fee. The Exchange believes that it
is reasonable to require annual submissions of the Non-Display Use
Declaration so that the Exchange will have current and accurate
information about the use of the NYSE National Integrated Feed and can
correctly assess fees for the uses of the NYSE National Integrated
Feed. Requiring annual submissions of such declarations is reasonable
because it also allows users to re-assess their own usage each year.
The Exchange believes that it is reasonable to impose a late fee in
connection with the submission of the Non-Display Use Declaration. In
order to correctly assess fees for the non-display use of the NYSE
National Integrated Feed, the Exchange needs to have current and
accurate information about the use of the NYSE National Integrated
Feed. The failure of data recipients to submit the Non-Display
[[Page 9856]]
Use Declaration on time leads to potentially incorrect billing and
administrative burdens, including tracking and obtaining late Non-
Display Use Declarations and correcting and following up on payments
owed in connection with late Non-Display Use Declarations. The purpose
of the late fee is to incent data recipients to submit the Non-Display
Use Declaration promptly to avoid the administrative burdens associated
with the late submission of Non-Display Use Declarations.
Multiple Data Feed Fee. The Exchange believes that it is reasonable
to require data recipients to pay a modest additional fee for taking a
data feed for a market data product in more than two locations, because
such data recipients can derive substantial value from being able to
consume the product in as many locations as they want. In addition,
there are administrative burdens associated with tracking each location
at which a data recipient receives the product. The Multiple Data Feed
Fee is designed to encourage data recipients to better manage their
requests for additional data feeds and to monitor their usage of data
feeds. The proposed fee is designed to apply to data feeds received in
more than two locations so that each data recipient can have one
primary and one backup data location before having to pay a multiple
data feed fee.
Fee Waiver for Federal Agencies. The Exchange believes the proposal
to not charge the access fees, display fees for professional users, and
non-display fees associated with its proprietary market data products
to customers that are Federal agencies is reasonable because it is
designed to facilitate federal government regulation without giving an
undue advantage to one set of commercial users over another. The
Exchange believes that it is reasonable to assess no fees to Federal
agencies that subscribe to the Exchange's proprietary market data
products because Federal agencies do not use the Exchange's proprietary
market data for commercial gain, but only for regulatory purposes.
One-Month Free Trial. The Exchange believes the proposal to provide
the NYSE National Integrated Free 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 feed and determine
whether it suits 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 BX offers new
subscribers of BX TotalView a 30-day waiver of user fees.\73\
---------------------------------------------------------------------------
\73\ See Section 123(a)(4) of Nasdaq BX's Equity 7 Pricing
Schedule.
---------------------------------------------------------------------------
For all of the foregoing reasons, the Exchange believes that the
proposed fees for the NYSE National Integrated Fee are reasonable.
The Proposed Fees Are Equitably Allocated
The Exchange believes the proposed fees for the NYSE National
Integrated Feed are allocated fairly and equitable among the various
categories of users of the feed, and any differences among categories
of users are justified.
Overall. The Exchange believes that the proposed fees are equitably
allocated because they will apply to all data recipients that choose to
subscribe to the NYSE National Integrated Feed. Any subscriber or
vendor that chooses to subscribe to the NYSE National Integrated Feed
is subject to the same Fee Schedule, regardless of what type of
business they operate or the use they plan to make of the data feed.
Subscribers and vendors may choose to continue to receive some or all
of the data on the NYSE National Integrated Feed through the existing
separate feeds for free, or they can choose to pay for the NYSE
National Integrated Feed in order to receive integrated data, or they
or they can choose a combination of the two approaches, thereby
allowing each vendor or subscriber to choose the best business solution
for itself.
Access Fee. The Exchange believes the proposed monthly Access Fee
of $2,500 for the NYSE National Integrated Feed is equitably allocated
because it would be charged on an equal basis to all data recipients
that receive a data feed of the NYSE National Integrated Feed,
regardless of what type of business they operate or the use they plan
to make of the data feed.
Redistribution Fees. The Exchange believes the proposed monthly fee
of $1,500 for redistributing the NYSE National Integrated Feed is
equitably allocated because it would be charged on an equal basis to
those vendors that choose to redistribute the feed.
User Fees. The Exchange believes that the fee structure
differentiating Professional User fees ($10 per month per user) from
Non-Professional User fees ($1 per month per user) for display device
access to the NYSE National Integrated Feed is equitable. This
structure has long been used by the Exchange to reduce the price of
data to Non-Professional Users and make it more broadly available.\74\
Offering the NYSE National Integrated Feed to Non-Professional Users
with the same data as is available to Professional Users results in
greater equity among data recipients. These user fees would be charged
uniformly to all display devices that have access to the NYSE National
Integrated Feed.
---------------------------------------------------------------------------
\74\ See, e.g., Securities Exchange Act Release No. 59544 (March
9, 2009), 74 FR 11162 (March 16, 2009) (SR-NYSE-2008-131)
(establishing the $15 Non-Professional User Fee (Per User) for NYSE
OpenBook); Securities Exchange Act Release No. 20002, File No. S7-
433 (July 22, 1983), 48 FR 34552 (July 29, 1983) (establishing Non-
Professional fees for CTA data); NASDAQ BX Equity 7 Pricing
Schedule, Section 123.
---------------------------------------------------------------------------
Non-Display Use Fees. The Exchange believes the proposed Non-
Display Use fees are equitably allocated because they would require
subscribers to pay fees only for the uses they actually make of the
data. As noted above, non-display data can be used by data recipients
for a wide variety of profit-generating purposes (including trading,
risk management, and compliance) as well as purposes that do not
directly generate revenues but nonetheless substantially reduce the
recipient's costs by automating certain functions. The Exchange
believes that it is equitable to charge non-display data subscribers a
$5,000 fee for each category of use they make of such data--namely,
using the data on their own behalf (Category 1), on behalf of their
clients (Category 2), and to internally match buy and sell orders
within an organization (Category 3)--because this fee structure results
in subscribers with greater uses of the data paying higher fees, and
subscribers with fewer uses of the data paying lower fees. This
segmented fee structure is also equitable because no subscriber of non-
display data would be charged a fee for a category of use in which it
did not actually engage.
The Exchange also believes that, regarding Category 3 fees, it is
equitable to charge $5,000 per month for each trading platform on which
the data recipient uses the Non-Display data, because such use of the
data is directly in competition with the Exchange and the Exchange
should be permitted to recoup some of its lost trading revenue by
charging for the data that makes such competition possible. The
Exchange believes that it is equitable to cap such fees for Category 3
use at $15,000 per month per data recipient, because a higher monthly
fee may potentially dissuade competitors from buying the NYSE National
Integrated Feed for use by their trading platforms.
Non-Display Use Declaration Late Fee. The Exchange believes that
the proposed fee of $1,000 per month for a late Non-Display Use
Declaration is equitably allocated because it applies to
[[Page 9857]]
any data recipient that pays an Access Fee for the NYSE National
Integrated Feed but has failed to complete and submit a Non-Display Use
Declaration. In addition, the Exchange believes that it is equitable to
charge a late fee to subscribers who fail to timely submit their Non-
Display Use Declarations because their failure to do so leads to
potentially incorrect billing and administrative burdens on the part of
the Exchange. The Exchange believes it is equitable to defray these
administrative costs by imposing a late fee only on subscribers' whose
declarations were late, as opposed to all subscribers.
Multiple Data Feed Fee. The Exchange believes that the $200 per
month per location fee to data recipients taking the NYSE National
Integrated Feed in more than two locations is equitable because it
would apply to all such customers, regardless of what type of business
they operate or the use they make of the data feed. In addition, the
Exchange believes that it is equitable to charge a fee to subscribers
for taking a data feed in more than two locations because there are
administrative burdens on the part of the Exchange associated with
tracking each location at which a data recipient receives the product.
The Exchange believes that it is equitable for it to defray these
administrative costs by imposing a modest fee only on subscribers who
seek to take the feed in more than two locations, as opposed to all
subscribers.
Fee Waiver for Federal Agencies. The Exchange believes that the
proposal to not charge the access fees, display fees for professional
users, and non-display fees associated with its proprietary market data
products to customers that are Federal agencies is equitable because it
is designed to facilitate federal government regulation without giving
an undue advantage to one set of commercial users over another. The
Exchange believes that it is equitable to waive fees for Federal
agencies that subscribe to the Exchange's proprietary market data
products because Federal agencies do not use the Exchange's proprietary
market data for commercial gain, but only for regulatory purposes.
One-Month Free Trial. The Exchange believes the proposal to provide
the NYSE National Integrated Feed 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 of the NYSE National
Integrated Feed would not be charged the Access Fee, Non-Display Fee,
any applicable Professional and Non-Professional User Fee, and
Redistribution Fee 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 the NYSE National
Integrated Feed, since customers who are current or previous
subscribers of the feed are already familiar with it and whether it
suits their needs.
For all of the foregoing reasons, the Exchange believes that the
proposed fees for the NYSE National Integrated Fee are equitably
allocated.
The Proposed Fees Are Not Unfairly Discriminatory
The Exchange believes the proposed fees for the NYSE National
Integrated Feed 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. The Exchange believes that the proposed fees are not
unfairly discriminatory because they would apply to all data recipients
that choose to subscribe to the NYSE National Integrated Feed. Any
vendor or subscriber that chooses to subscribe to the NYSE National
Integrated Feed is subject to the same Fee Schedule, regardless of what
type of business they operate or the use they plan to make of the data
feed. Vendors and subscribers may choose to continue to receive some or
all of the data on the NYSE National Integrated Feed through the
existing separate feeds for free, or they can choose to pay for the
NYSE National Integrated Feed in order to receive integrated data, or
they or they can choose a combination of the two approaches, thereby
allowing each vendor or subscriber to choose the best business solution
for itself.
Access Fee. The Exchange believes the proposed monthly Access Fee
of $2,500 for the NYSE National Integrated Feed is not unfairly
discriminatory because it would be charged on an equal basis to all
data recipients that receive a data feed of the NYSE National
Integrated Feed, regardless of what type of business they operate or
the use they plan to make of the data feed.
Redistribution Fees. The Exchange believes the proposed monthly fee
of $1,500 for redistributing the NYSE National Integrated Feed is not
unfairly discriminatory because it would be charged on an equal basis
to those vendors that choose to redistribute the feed.
User Fees. The Exchange believes that the fee structure
differentiating Professional User fees ($10 per month per user) from
Non-Professional User fees ($1 per month per user) for display device
access to the NYSE National Integrated Feed is not unfairly
discriminatory. This structure has long been used by the Exchange to
reduce the price of data to Non-Professional Users and make it more
broadly available.\75\ Offering the NYSE National Integrated Feed to
Non-Professional Users with the same data as is available to
Professional Users results in greater equity among data recipients.
These user fees would be charged uniformly to all display devices that
have access to the NYSE National Integrated Feed.
---------------------------------------------------------------------------
\75\ See e.g., Securities Exchange Act Release No. 59544 (March
9, 2009), 74 FR 11162 (March 16, 2009) (SR-NYSE-2008-131)
(establishing the $15 Non-Professional User Fee (Per User) for NYSE
OpenBook). See e.g., Securities Exchange Act Release No. 20002, File
No. S7-433 (July 22, 1983), 48 FR 34552 (July 29, 1983)
(establishing nonprofessional fees for CTA data); NASDAQ BX Equity 7
Pricing Schedule, Section 123.
---------------------------------------------------------------------------
Non-Display Use Fees. The Exchange believes the proposed Non-
Display Use fees are not unfairly discriminatory because they would
require subscribers for non-display use to pay fees only for the
categories of use they actually make of the data. As noted above, non-
display data can be used by data recipients for a wide variety of
profit-generating purposes (including trading, risk management, and
compliance) as well as purposes that do not directly generate revenues
but nonetheless substantially reduce the recipient's costs by
automating certain functions. The Exchange believes that it is not
unfairly discriminatory to charge non-display data subscribers a $5,000
fee for each category of use they make of such data--namely, using the
data on their own behalf (Category 1), on behalf of their clients
(Category 2), and to internally match buy and sell orders within an
organization (Category 3)--because this fee structure results in
subscribers with greater uses for the data paying higher fees, while
subscribers with fewer uses of the data pay lower fees. This segmented
fee structure is not unfairly discriminatory because no subscriber of
non-display data would be charged a fee for a category of use in which
it did not actually engage.
The Exchange also believes that, regarding Category 3 fees, it is
not unreasonably discriminatory to charge $5,000 per month for each
trading platform on which the data recipient uses the Non-Display data,
because such use of the data is directly in competition with the
Exchange and the Exchange
[[Page 9858]]
should be permitted to recoup some of its lost trading revenue by
charging for the data that makes such competition possible. The
Exchange believes that it is not unreasonably discriminatory to cap
such fees for Category 3 use at $15,000 per month per data recipient,
because a higher monthly fee may potentially dissuade competitors from
buying the NYSE National Integrated Feed for use by their trading
platforms.
Non-Display Use Declaration Late Fee. The Exchange believes that
the proposed fee of $1,000 per month for a late Non-Display Use
Declaration is not unfairly discriminatory because it applies to any
data recipient that pays an Access Fee for the NYSE National Integrated
Feed but has failed to complete and submit a Non-Display Use
Declaration. In addition, the Exchange believes that it is not unfairly
discriminatory to charge a late fee to subscribers who fail to timely
submit their Non-Display Use Declarations because their failure to do
so leads to potentially incorrect billing and administrative burdens on
the part of the Exchange. Nor is it unfairly discriminatory for the
Exchange to defray these administrative costs by imposing a late fee
only on subscribers' whose declarations were late, as opposed to all
subscribers.
Multiple Data Feed Fee. The Exchange believes that the $200 per
month per location fee to data recipients taking the NYSE National
Integrated Feed in more than two locations is not unfairly
discriminatory because it would apply to all such customers, regardless
of what type of business they operate or the use they make of the data
feed. In addition, the Exchange believes that it is not unfairly
discriminatory to charge a fee to subscribers for taking a data feed in
more than two locations because there are administrative burdens on the
part of the Exchange associated with tracking each location at which a
data recipient receives the product. The Exchange believes that it is
not unfairly discriminatory for it to defray these administrative costs
by imposing a modest fee only on subscribers who seek to take the feed
in more than two locations, as opposed to all subscribers.
Fee Waiver for Federal Agencies. The Exchange believes that the
proposal to not charge the access fees, display fees for professional
users, and non-display fees associated with its proprietary market data
products to customers that are Federal agencies is not unreasonably
discriminatory because it is designed to facilitate federal government
regulation without giving an undue advantage to one set of commercial
users over another. The Exchange believes that it is not unfairly
discriminatory to waive fees for Federal agencies that subscribe to the
Exchange's proprietary market data products because Federal agencies do
not use the Exchange's proprietary market data for commercial gain, but
only for regulatory purposes.
One-Month Free Trial. The Exchange believes the proposal to provide
the NYSE National Integrated Feed to new customers free-of-charge for
their first subscription month is not unfairly discriminatory 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 of the
NYSE National Integrated Feed would not be charged the Access Fee, Non-
Display Fee, any applicable Professional and Non-Professional User Fee,
and Redistribution Fee for one calendar month. The Exchange believes it
is not unfairly discriminatory to restrict the availability of this
one-month free trial to customers that have not previously subscribed
to the NYSE National Integrated Feed, since customers who are current
or previous subscribers of the feed are already familiar with it and
whether it suits their needs.
For all of the foregoing reasons, the Exchange believes that the
proposed fees for the NYSE National Integrated Fee are not unfairly
discriminatory.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed fees 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 the NYSE National Integrated
Feed, and customers may not only choose whether to subscribe to the
feed at all, but may tailor their subscriptions by choosing particular
uses of the feed but not others (e.g., Category 1 only versus all three
categories; display device access only versus non-display use).
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 (e.g., Category 2 fees apply only to those making non-
display use on behalf of clients; late fees apply only to customers who
fail to timely submit their declarations), 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 from unfairly asking
subscribers to pay fees for services they did not use, or late fees
they did not actually incur.
Intermarket Competition. The Exchange believes that the proposed
fees do not impose a burden on competition or on other SROs that is not
necessary or appropriate. As demonstrated above and in Professor
Rysman's attached [sic] paper, exchanges are platforms for market data
and trading. In setting the proposed fees, the Exchange was constrained
by the availability of numerous 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 for the NYSE National Integrated Feed, 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. Many other exchanges offer proprietary
data feeds like the NYSE National Integrated Feed, supplying depth of
book order data, last sale data, security status updates, stock summary
messages, and the exchange's best bid and offer at any given time, on a
real-time basis. 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 platform, in which case the
platform would stand to lose both market data and trading fees. These
competitive pressures ensure that no one exchange's market data fees
can impose an unnecessary burden on
[[Page 9859]]
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) \76\ of the Act and subparagraph (f)(2) of Rule
19b-4 \77\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\76\ 15 U.S.C. 78s(b)(3)(A).
\77\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of such proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is necessary or
appropriate in the public interest, for the protection of investors, or
otherwise in furtherance of the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings under
Section 19(b)(2)(B) \78\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\78\ 15 U.S.C. 78s(b)(2)(B).
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IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NYSENAT-2020-05 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-NYSENAT-2020-05. This
file number should be included on the subject line if email is used. To
help the Commission process and review your comments more efficiently,
please use only one method. The Commission will post all comments on
the Commission's internet website (https://www.sec.gov/rules/sro.shtml).
Copies of the submission, all subsequent amendments, all written
statements with respect to the proposed rule change that are filed with
the Commission, and all written communications relating to the proposed
rule change between the Commission and any person, other than those
that may be withheld from the public in accordance with the provisions
of 5 U.S.C. 552, will be available for website viewing and printing in
the Commission's Public Reference Room, 100 F Street NE, Washington, DC
20549, on official business days between the hours of 10:00 a.m. and
3:00 p.m. Copies of the filing also will be available for inspection
and copying at the principal office of the Exchange. All comments
received will be posted without change. Persons submitting comments are
cautioned that we do not redact or edit personal identifying
information from comment submissions. You should submit only
information that you wish to make available publicly. All submissions
should refer to File Number SR-NYSENAT-2020-05, and should be submitted
on or before March 12, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\79\
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\79\ 17 CFR 200.30-3(a)(12).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2020-03411 Filed 2-19-20; 8:45 am]
BILLING CODE 8011-01-P
