Self-Regulatory Organizations; NYSE American, LLC; Notice of Filing and Immediate Effectiveness of Proposed Rule Change Amending the Fees for NYSE American BBO and NYSE American Trades by Modifying the Application of the Access Fee and Amending the Fees for NYSE American Trades by Adopting a Waiver Applicable to the Redistribution Fee, 73556-73567 [2020-25390]
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73556
Federal Register / Vol. 85, No. 223 / Wednesday, November 18, 2020 / Notices
As stated above, the RWD Plan is
designed to enhance OCC’s ability to
address extreme stresses or crises by
establishing a framework that OCC
could use to navigate the use of its
Enhanced Risk Management Tools and
Recovery Tools, with the aim of
maintaining OCC’s viability as a going
concern. In the event that OCC’s
recovery efforts are not successful, the
RWD Plan would seek to improve the
possibility that a resolution of OCC’s
operations can be conducted in an
orderly manner, thereby minimizing the
disruption to Clearing Members and
market participants and improving the
likelihood of minimizing the risk of
contagion to the broader financial
system. Accordingly, OCC believes the
updates to the RWD Plan would
improve the possibility of OCC’s
effectively addressing a variety of
potential risks, thereby improving
OCC’s ability to ultimately maintain
market and public confidence during a
time of unprecedented stress. In this
regard, OCC believes the proposed
change would promote robust risk
management and safety and soundness
and thereby reduce systemic risks and
support the stability of the broader
financial system.
OCC also believes that the proposed
change is consistent with Exchange Act
Rule 17Ad–22(e)(3)(ii), which requires
each covered clearing agency to
establish, implement, maintain and
enforce written policies and procedures
reasonably designed to include plans for
the recovery and orderly wind-down of
the covered clearing agency necessitated
by credit losses, liquidity shortfalls,
losses from general business risk, or any
other losses.25 As stated above, the RWD
Plan would describe OCC’s plans to
recover from, or orderly resolve its
operations as a result of, severe stress
brought about by credit losses, liquidity
shortfalls, losses from general business
risk or other losses.26 The proposed
updates to the RWD Plan would
improve the accuracy of the inventory of
OCC’s Recovery Tools and improve
OCC’s evaluation of scenarios which
may potentially prevent OCC from
providing its Critical Services as a
going-concern, as well as OCC’s plans
for recovery or orderly wind-down.
Further, the proposed changes to the
Plan would update and improve the
information that a resolution authority
may reasonably anticipate as necessary
for purposes of recovery and orderly
wind-down planning.27 In this regard,
OCC believes the proposed change is
25 17
CFR 240.17Ad–22(e)(3)(ii).
26 17 CFR 240.17Ad–22(e)(3)(ii).
27 See 81 FR at 70810.
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17:59 Nov 17, 2020
consistent with Rule 17Ad–
22(e)(3)(ii).28
III. Date of Effectiveness of the Advance
Notice and Timing for Commission
Action
The proposed change may be
implemented if the Commission does
not object to the proposed change
within 60 days of the later of (i) the date
the proposed change was filed with the
Commission or (ii) the date any
additional information requested by the
Commission is received. OCC shall not
implement the proposed change if the
Commission has any objection to the
proposed change.
The Commission may extend the
period for review by an additional 60
days if the proposed change raises novel
or complex issues, subject to the
Commission providing the clearing
agency with prompt written notice of
the extension. A proposed change may
be implemented in less than 60 days
from the date the advance notice is
filed, or the date further information
requested by the Commission is
received, if the Commission notifies the
clearing agency in writing that it does
not object to the proposed change and
authorizes the clearing agency to
implement the proposed change on an
earlier date, subject to any conditions
imposed by the Commission.
OCC shall post notice on its website
of proposed changes that are
implemented. The proposal shall not
take effect until all regulatory actions
required with respect to the proposal are
completed.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the advance notice is
consistent with the Clearing
Supervision 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–
OCC–2020–806 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549.
All submissions should refer to File
Number SR–OCC–2020–806. This file
28 17
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CFR 240.17Ad–22(e)(3)(ii).
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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 advance notice that
are filed with the Commission, and all
written communications relating to the
advance notice 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 self-regulatory organization.
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–OCC–2020–806 and should
be submitted on or before December 3,
2020.
By the Commission.
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–25441 Filed 11–17–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90408; File No. SR–
NYSEAMER–2020–79]
Self-Regulatory Organizations; NYSE
American, LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Rule Change Amending the Fees for
NYSE American BBO and NYSE
American Trades by Modifying the
Application of the Access Fee and
Amending the Fees for NYSE American
Trades by Adopting a Waiver
Applicable to the Redistribution Fee
November 12, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (the
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Federal Register / Vol. 85, No. 223 / Wednesday, November 18, 2020 / Notices
‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
2, 2020, NYSE American, LLC (‘‘NYSE
American’’ or the ‘‘Exchange’’) filed
with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The 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 (1) amend
the fees for NYSE American BBO and
NYSE American Trades by modifying
the application of the Access Fee; and
(2) amend the fees for NYSE American
Trades by adopting a waiver applicable
to the Redistribution Fee. The Exchange
proposes to implement the proposed fee
changes on January 1, 2021. 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.
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A. Self-Regulatory Organization’s
Statement of the Purpose of, and the
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange proposes to decrease
the fees for certain NYSE American
market data products, as set forth on the
NYSE American Proprietary Market
Data Fee Schedule (‘‘Fee Schedule’’).
These fee decreases, taken together with
similar fee decreases filed by the
Exchange’s affiliated exchanges, New
York Stock Exchange LLC (‘‘NYSE’’) and
NYSE Arca, Inc. (‘‘NYSE Arca’’),3 will
1 15
U.S.C. 78s(b)(1).
CFR 240.19b–4.
3 See SR–NYSE–2020–91 and SR–NYSEArca–
2020–95.
2 17
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73557
reduce the fees associated with the
NYSE BQT proprietary data product,
which competes directly with similar
products offered by both the Nasdaq and
Cboe families of U.S. equity exchanges.
Collectively, the proposed fee decreases
are intended to respond to the
competition posed by similar products
offered by the other exchange groups.
Specifically, the Exchange proposes to
(1) reduce the Access Fees by more than
93% for Redistributors 4 of NYSE
American BBO and NYSE American
Trades that subscribe to only such data
feeds and do not subscribe to any other
market data product listed on the Fee
Schedule, and use such market data
products for external distribution only;
and (2) waive the Redistribution Fee for
Redistributors that are eligible for the
Per User Access Fee if the Redistributor
provides NYSE American Trades
externally to at least one data feed
recipient and reports such recipient to
the Exchange. All of the proposed
changes would decrease fees for market
data on the Exchange.
The Exchange proposes to implement
these proposed fee changes on January
1, 2021.
exchanges,7 numerous alternative
trading systems,8 and broker-dealer
internalizers and wholesalers, all
competing for order flow. Based on
publicly-available information, no
single exchange currently has more than
18% market share (whether including or
excluding auction volume).9
With the NYSE BQT market data
product, NYSE American and its
affiliates compete head to head with the
Nasdaq Basic 10 and Cboe One Feed 11
market data products. Similar to those
market data products, NYSE BQT,
which was established in 2014,12
consists of certain elements from the
NYSE American BBO and NYSE
American Trades market data products
as well as from market data products
from the Exchange’s affiliates, NYSE,
NYSE Arca, NYSE Chicago, Inc. (‘‘NYSE
Chicago’’),13 and NYSE National, Inc.
(‘‘NYSE National’’).14 Similar to both
Nasdaq Basic and the Cboe One Feed,
NYSE BQT provides investors with a
unified view of comprehensive last sale
and BBO data in all Tape A, B, and C
securities that trade on the Exchange,
NYSE, NYSE Arca, NYSE Chicago, and
Background
The Commission has repeatedly
expressed its preference for competition
over regulatory intervention in
determining prices, products, and
services in the securities markets. In
Regulation NMS, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues, and also recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 5
While Regulation NMS has enhanced
competition, it has also fostered a
‘‘fragmented’’ market structure where
trading in a single stock can occur
across multiple trading centers. When
multiple trading centers compete for
order flow in the same stock, the
Commission has recognized that ‘‘such
competition can lead to the
fragmentation of order flow in that
stock.’’ 6 Indeed, equity trading is
currently dispersed across 16
7 See Cboe Global Markets, U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/. See
generally https://www.sec.gov/fast-answers/
divisionsmarketregmrexchangesshtml.html.
8 See FINRA ATS Transparency Data, available at
https://otctransparency.finra.org/otctransparency/
AtsIssueData. A list of alternative trading systems
registered with the Commission is available at
https://www.sec.gov/foia/docs/atslist.htm.
9 See Cboe Global Markets U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/.
10 As described on the Nasdaq website, available
here: https://www.nasdaqtrader.com/
Trader.aspx?id=nasdaqbasic, Nasdaq Basic is a
‘‘low cost alternative’’ that provides ‘‘Best Bid and
Offer and Last Sale information for all U.S.
exchange-listed securities based on liquidity within
the Nasdaq market center, as well as trades reported
to the FINRA Trade Reporting Facility (‘‘TRF’’).’’
11 As described on the Cboe website, available
here: https://markets.cboe.com/us/equities/market_
data_services/cboe_one/, the Cboe One Feed is a
‘‘market data product that provides cost-effective,
high-quality reference quotes and trade data for
market participants looking for comprehensive,
real-time market data’’ and provides a ‘‘unified
view of the market from all four Cboe equity
exchanges: BZX Exchange, BYX Exchange, EDGX
Exchange, and EDGA Exchange.’’
12 See Securities Exchange Act Release Nos.
72750 (August 4, 2014), 79 FR 46494 (August 8,
2014) (notice—NYSE BQT); and 73553 (November
6, 2014), 79 FR 67491 (November 13, 2014)
(approval order—NYSE BQT) (SR–NYSE–2014–40)
(‘‘NYSE BQT Filing’’).
13 In 2019, NYSE BQT was amended to include
NYSE Chicago BBO and NYSE Chicago Trades. See
Securities Exchange Act Release No. 87511
(November 12, 2019), 84 FR 63689 (November 18,
2019) (SR–NYSE–2019–60).
14 In 2018, NYSE BQT was amended to include
NYSE National BBO and NYSE National Trades.
See Securities Exchange Act Release No. 83359
(June 1, 2018), 83 FR 26507 (June 7, 2018) (SR–
NYSE–2018–22).
4 A Redistributor is a vendor or any other person
that provides a NYSE data product to a data
recipient or to any system that a data recipient uses,
irrespective of the means of transmission or access.
5 See Securities Exchange Act Release No. 51808
(June 9, 2005), 70 FR 37495, 37499 (June 29, 2005)
(S7–10–04) (Final Rule) (‘‘Regulation NMS
Adopting Release’’).
6 See Securities Exchange Act Release No. 61358,
75 FR 3594, 3597 (January 21, 2010) (File No. S7–
02–10) (Concept Release on Equity Market
Structure).
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Federal Register / Vol. 85, No. 223 / Wednesday, November 18, 2020 / Notices
NYSE National. Also similar to Nasdaq
Basic and the Cboe One Feed, NYSE
BQT is not intended to be used for
purposes of making order-routing or
trading decisions, but rather provides
indicative prices for Tape A, B, and C
securities.15
Currently, to subscribe to NYSE BQT,
subscribers are charged an access fee of
$250 per month.16 Additionally,
subscribers must also subscribe to, and
pay applicable fees for NYSE American
BBO, NYSE American Trades, NYSE
BBO, NYSE Trades, NYSE Arca BBO,
NYSE Arca Trades, NYSE Chicago BBO,
NYSE Chicago Trades, NYSE National
BBO, and NYSE National Trades. Thus,
an NYSE BQT subscriber currently pays
the $250 access fee for NYSE BQT, plus
a $1,500 access fee for each of NYSE
BBO and NYSE Trades,17 plus a $750
access fee for each of NYSE American
BBO and NYSE American Trades,18 plus
a $750 access fee for each of NYSE Arca
BBO and NYSE Arca trades,19 for a total
of $6,250 ($250 + $3,000 + $1,500 +
$1,500).20 In addition, an NYSE BQT
subscriber would need to pay for the
applicable Professional or NonProfessional User Fees for the
underlying market data products, as
applicable.21
Because NYSE BQT is priced based
on the fees associated with the
underlying ten market data feeds, the
15 See
NYSE BQT Filing, supra note 13.
NYSE Proprietary Market Data Fees,
available here: https://www.nyse.com/publicdocs/
nyse/data/NYSE_Market_Data_Fee_Schedule.pdf.
17 See id.
18 See Fee Schedule, available here: https://
www.nyse.com/publicdocs/nyse/data/NYSE_
American_Equities_Market_Data_Fee_
Schedule.pdf.
19 See NYSE Arca Equities Proprietary Market
Data Fees, available here: https://www.nyse.com/
publicdocs/nyse/data/NYSE_Arca_Equities_Fee_
Schedule.pdf.
20 There are currently no fees charged for the
NYSE Chicago BBO, NYSE Chicago Trades, NYSE
National BBO, or NYSE National Trades market
data products.
21 The Exchange is not proposing any changes to
the User Fees. Currently, the Professional User Fees
for each of NYSE BBO and NYSE Trades is $4 per
month, and the Non-Professional User Fees for each
of NYSE BBO and NYSE Trades is $0.20 per month.
See NYSE Proprietary Market Data Fees, available
here: https://www.nyse.com/publicdocs/nyse/data/
NYSE_Market_Data_Fee_Schedule.pdf. The
Professional User Fees for each of NYSE American
BBO and NYSE American Trades is $4 per month,
and the Non-Professional User Fees for each of
NYSE American BBO and NYSE American Trades
is $0.25 per month. See NYSE American Price List,
available here: https://www.nyse.com/publicdocs/
nyse/data/NYSE_American_Equities_Market_Data_
Fee_Schedule.pdf. The Professional User Fees for
each of NYSE Arca BBO and NYSE Arca Trades is
$4 per month, and the Non-Professional User Fees
for each of NYSE Arca BBO and NYSE Arca Trades
is $0.25 per month. See NYSE Arca Price List,
available here: https://www.nyse.com/publicdocs/
nyse/data/NYSE_Arca_Equities_Proprietary_Data_
Fee_Schedule.pdf.
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16 See
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Exchange and its affiliates propose to
compete with the Nasdaq Basic and
Cboe One Feed by reducing fees for the
underlying market data products that
comprise NYSE BQT. Together with
NYSE and NYSE Arca, the Exchange
similarly proposes to compete for
subscribers to NYSE BQT by designing
its fee decreases to be attractive to
Redistributors that intend to subscribe
to and externally redistribute only
NYSE BQT. The Exchange understands
that data recipients that are interested in
subscribing to NYSE BQT obtain their
data from Redistributors that do not
currently subscribe to either the NYSE
BQT data feed or any other market data
product listed on the Fee Schedule.
Because such Redistributors do not
subscribe to NYSE BQT, the prospective
data recipients that are the customers of
such Redistributors are unable to
subscribe to NYSE BQT. The proposed
fee changes are designed to provide a
financial incentive for such
Redistributors to subscribe to NYSE
BQT so that their customers, which
have expressed an interest in
subscribing to NYSE BQT, would be
able to access the product via such
Redistributors.
Access Fee—NYSE American BBO and
NYSE American Trades
NYSE American BBO is a NYSE
American-only market data product that
allows a vendor to redistribute on a realtime basis the same best-bid-and-offer
information that NYSE American
reports under the Consolidated
Quotation Plan (‘‘CQ Plan’’) for
inclusion in the CQ Plan’s consolidated
quotation information data stream
(‘‘NYSE American BBO Information’’).22
NYSE American BBO Information
includes the best bids and offers for all
securities that are traded on the
Exchange and for which NYSE
American reports quotes under the CQ
Plan. NYSE American BBO is available
over a single data feed, regardless of the
markets on which the securities are
listed. NYSE American BBO is made
available to its subscribers no earlier
than the information it contains is made
available to the processor under the CQ
Plan.
NYSE American Trades is a NYSE
American-only market data product that
allows a vendor to redistribute on a realtime basis the same last sale information
that NYSE American reports to the
Consolidated Tape Association (‘‘CTA’’)
22 See Securities Exchange Act Release Nos.
61936 (April 16, 2010), 75 FR 21088 (April 22,
2010) (SR–NYSEAmex–2010–35) (notice—NYSE
American BBO); and 62187 (May 27, 2010), 75 FR
31500 (June 3, 2010) (SR–NYSEAmex–2010–35)
(approval order—NYSE American BBO).
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for inclusion in the CTA’s consolidated
data stream and certain other related
data elements (‘‘NYSE American Last
Sale Information’’).23 NYSE American
Last Sale Information includes last sale
information for all securities that are
traded on the Exchange. NYSE
American Trades is made available to its
subscribers at the same time as the
information it contains is made
available to the processor under the
CTA Plan.
Currently, subscribers of each of the
NYSE American BBO and NYSE
American Trades products that receive
a data feed pay an Access Fee of $750
per month. In February 2020, the
Exchange added the Per User Access
Fee, which is a reduced Access Fee of
$100 per month currently available only
for subscribers of NYSE American BBO
and NYSE American Trades that receive
those products in a display-only format,
including for internal use for
Professional Users and external
distribution to both Professional and
Non-Professional Users.24
The Exchange now proposes that
Redistributors of NYSE American BBO
and NYSE American Trades data feeds
that do not subscribe to any other
market data product listed on the Fee
Schedule, and use such market data
products for external distribution only,
would also be eligible for the reduced
Per User Access Fee. A Redistributor
that receives a data feed of NYSE
American BBO and NYSE American
Trades and uses the market data
products for any other purpose (such as
internal use) or that subscribes to any
other products listed on the Fee
Schedule would continue to pay the
$1,500 per month General Access Fee.
As currently set forth in footnote 3 to
the Fee Schedule, a subscriber would be
charged only one access fee for each of
the NYSE American BBO and NYSE
American Trades products, depending
on the use of that product.
To effect this change, the Exchange
proposes to modify footnote 3 to the Fee
23 See Securities Exchange Act Release Nos.
61936 (April 16, 2010), 75 FR 21088 (April 22,
2010) (SR–NYSEAmex–2010–35) (notice—NYSE
American Trades); and 62187 (May 27, 2010), 75 FR
31500 (June 3, 2010) (SR–NYSEAmex–2010–35)
(approval order—NYSE American Trades).
24 A Per User Access Fee currently applies for
subscribers of NYSE American BBO and NYSE
American Trades that receive a data feed and use
those market data products in a display-only
format. See Fee Schedule. See also Securities
Exchange Act Release No. 87801 (December 19,
2019), 84 FR 71491 (December 27, 2019) (SR–
NYSEAMER–2019–55) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change,
as Modified by Partial Amendment No. 1, To
Amend the Fees for NYSE American BBO and
NYSE American Trades) (‘‘BQT Fee Reduction
Filing’’).
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Federal Register / Vol. 85, No. 223 / Wednesday, November 18, 2020 / Notices
Schedule as follows (proposed text is
italicized, proposed deletions
bracketed):
The Per User Access Fee is charged to: (i)
[A] a subscriber that receives a data feed and
uses the market data product only for
Professional Users and Non-Professional
Users in a display-only format, including for
internal use and external redistribution in a
display-only format, [will be charged the Per
User Access Fee] and (ii) a Redistributor that
subscribes only to the NYSE American BBO
and NYSE American Trades data feeds, and
does not subscribe to any other Products
listed on this Fee Schedule, and uses these
market data products for external
distribution only. A subscriber that receives
a data feed and uses the market data product
for any other purpose, including if combined
with Per User use, will be charged the
General Access Fee. A subscriber will be
charged only one access fee for each of the
NYSE American BBO and NYSE American
Trades products, depending on the use of
that product.
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The proposed rule change would
result in lower fees for Redistributors of
each of the NYSE American BBO and
NYSE American Trades products that
receive NYSE American BBO and NYSE
American Trades data feeds and do not
subscribe to any other market data
product listed on the Fee Schedule, and
use such market data products for
external distribution only.25 The
Exchange believes that the proposed fee
reduction in NYSE American BBO and
NYSE American Trades would provide
an incentive for such Redistributors to
subscribe to the NYSE BQT data feeds
so that such product would be available
to their customers, which have
expressed an interest in subscribing to
NYSE BQT.
The proposed rule change is intended
to encourage greater use of NYSE BQT
by making it more affordable for
Redistributors that have customers
interested in subscribing to NYSE BQT
but that do not currently subscribe to
NYSE American BBO or NYSE
American Trades or any other products
listed on the Fee Schedule. The
proposed fee reduction would allow the
Exchange to compete more effectively
with Nasdaq Basic and Cboe One Feed
by expanding the number of
Redistributors that would subscribe to
NYSE BQT, and therefore make the
product available to data subscribers
interested in NYSE BQT.
25 The Per User Access Fee is 93% lower than the
General Access Fee. Together with the
corresponding proposed rule changes by NYSE and
NYSE Arca to similarly reduce the access fees to
their BBO and Trades products for Redistributors,
such Redistributors would be eligible for
significantly lower access fees for NYSE BQT, from
$6,250 per month to $850 per month ($250 + $200
+ $200 +$200), a reduction of more than 86%.
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Redistribution Fee—NYSE American
Trades
The Exchange currently charges a
Redistribution Fee of $750 per month
for NYSE American Trades. A
Redistributor is required to report to the
Exchange each month the number of
Professional and Non-Professional Users
and data feed recipients that receive
NYSE American Trades.
The Exchange proposes to waive the
Redistribution Fee for a Redistributor
that is eligible for the Per User Access
Fee if the Redistributor provides NYSE
American Trades externally to at least
one data feed recipient and reports such
data feed recipient or recipients to the
Exchange. For example, a Redistributor
that subscribes to the NYSE American
BBO and NYSE American Trades data
feeds and does not subscribe to any
other product listed on the Fee
Schedule would have the Redistribution
Fee waived for the month if such
Redistributor provides NYSE American
BBO and NYSE American Trades
externally to at least one data feed
recipient and reports such data feed
recipient to the Exchange.
By targeting this proposed fee waiver
to Redistributors that provide external
distribution of NYSE American Trades,
the Exchange believes that this would
provide an incentive for Redistributors
to make the NYSE BQT market data
product available to its customers.
Specifically, if a data recipient is
interested in subscribing to NYSE BQT
and relies on a Redistributor to obtain
market data products from the
Exchange, that data recipient would
need its Redistributor to redistribute
NYSE BQT. Currently, Redistributors
that redistribute some NYSE American
market data products do not necessarily
also make NYSE BQT available. The
Exchange believes that this proposed fee
waiver for Redistributors of NYSE
American Trades would provide an
incentive for Redistributors to make
NYSE BQT available to their customers,
which will increase the availability of
NYSE BQT to a larger potential
population of data recipients.26
Applicability of Proposed Rule Change
As noted above, the proposed rule
change is designed to further reduce the
overall cost of NYSE BQT by reducing
specified fees applicable to the
underlying market data products that
comprise NYSE BQT. Prior to the BQT
Fee Reduction Filing, the Exchange had
only one subscriber to NYSE BQT.
Today, the Exchange has seven
subscribers, three of whom became
26 NYSE American does not charge a
Redistribution Fee for NYSE American BBO.
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73559
customers as a direct result of the BQT
Fee Reduction Filing and currently pay
the reduced Per User Access Fee. The
Exchange believes that the proposed
rule changes would provide a further
incentive for Redistributors to subscribe
to NYSE BQT for purposes of providing
external distribution of NYSE BQT to
potential data recipients interested in
the product.
Because the proposed rule change is
targeted to potential Redistributors of
NYSE BQT that do not currently
subscribe to any NYSE market data
products, the proposed changes to the
availability of the NYSE American BBO
and NYSE American Trades Per User
Access Fees, together with the proposed
changes on NYSE and NYSE Arca, are
narrowly tailored with that purpose in
mind. Accordingly, these proposed fee
changes are not designed for
Redistributors that are existing
customers of NYSE American market
data products or that engage in internal
use of NYSE BQT. This proposed rule
change would not result in any changes
to the market data fees for NYSE
American BBO and NYSE American
Trades for such data subscribers.
The Exchange believes that there are
at least three potential Redistributors
that would meet the qualifications to be
eligible for these proposed fee changes.
The Exchange further believes that this
proposed rule change has the potential
to attract these three Redistributors as
new Redistributors for NYSE BQT, as
well as new NYSE BQT subscribers that
would be subscribing to NYSE
American BBO and NYSE American
Trades for the first time.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6 of the Act,27
in general, and Sections 6(b)(4) and
6(b)(5) of the Act,28 in particular, in that
it provides an equitable allocation of
reasonable fees among users and
recipients of the data and is not
designed to permit unfair
discrimination among customers,
issuers, and brokers.
The Proposed Rule Change Is
Reasonable
In adopting Regulation NMS, the
Commission granted SROs and brokerdealers increased authority and
flexibility to offer new and unique
market data to the public. The
Commission has repeatedly expressed
its preference for competition over
regulatory intervention in determining
27 15
28 15
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U.S.C. 78f(b)(4), (5).
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prices, products, and services in the
securities markets. Specifically, in
Regulation NMS, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues, and also recognized that
current regulation of the market system
‘‘has been remarkably successful in
promoting market competition in its
broader forms that are most important to
investors and listed companies.’’ 29
With respect to market data, the
decision of the United States Court of
Appeals for the District of Columbia
Circuit in NetCoalition v. SEC upheld
the Commission’s reliance on the
existence of competitive market
mechanisms to evaluate the
reasonableness and fairness of fees for
proprietary market data:
In fact, the legislative history indicates that
the Congress intended that the market system
‘‘evolve through the interplay of competitive
forces as unnecessary regulatory restrictions
are removed’’ and that the SEC wield its
regulatory power ‘‘in those situations where
competition may not be sufficient,’’ such as
in the creation of a ‘‘consolidated
transactional reporting system.’’ 30
The court agreed with the
Commission’s conclusion that
‘‘Congress intended that ‘competitive
forces should dictate the services and
practices that constitute the U.S.
national market system for trading
equity securities.’ ’’ 31
More recently, the Commission
confirmed that it applies a ‘‘marketbased’’ test in its assessment of market
data fees, and that under that test:
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the Commission considers whether the
exchange was subject to significant
competitive forces in setting the terms of its
proposal for [market data], including the
level of any fees. If an exchange meets this
burden, the Commission will find that its fee
rule is consistent with the Act unless there
is a substantial countervailing basis to find
that the terms of the rule violate the Act or
the rules thereunder.32
29 See Regulation NMS Adopting Release, 70 FR
37495, at 37499.
30 NetCoalition v. SEC, 615 F.3d 525, 535 (D.C.
Cir. 2010) (‘‘NetCoalition I’’) (quoting H.R. Rep. No.
94–229 at 92 (1975), as reprinted in 1975
U.S.C.C.A.N. 323).
31 Id. at 535.
32 See Securities Exchange Act Release No. 34–
90217 (October 16, 2020), 85 FR 67392 (October 22,
2020) (SR–NYSENAT–2020–05) (‘‘National IF
Approval Order’’) (internal quotation marks
omitted), quoting Securities Exchange Act Release
No. 59039 (December 2, 2008), 73 FR 74770, 74781
(December 9, 2008) (‘‘2008 ArcaBook Approval
Order’’).
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1. The Proposed Fees Are Constrained
by Significant Competitive Forces
a. Exchange Market Data Is Sold in a
Competitive Market
In 2018, Charles M. Jones, the Robert
W. Lear of Professor of Finance and
Economics of the Columbia University
School of Business, conducted an
analysis of the market for equity market
data in the United States. He canvassed
the demand for both consolidated and
exchange proprietary market data
products and the uses to which those
products were put by market
participants, and reported his
conclusions in a paper annexed
hereto.33 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 by offering their
proprietary market data products for
free for some period of time.’’ 34
• ‘‘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.’’ 35
• ‘‘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.’’ 36
• ‘‘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
33 See Exhibit 3A, Charles M. Jones,
Understanding the Market for U.S. Equity Market
Data, August 31, 2018 (hereinafter ‘‘Jones Paper’’).
34 Jones Paper at 2.
35 Id.
36 Id.
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trading, and (iii) revenues earned by
third-party vendors.’’ 37
• ‘‘For proprietary exchange data
feeds, the main question is whether
there is a competitive market for
proprietary market data. More than 40
active exchanges and alternative trading
systems compete vigorously in both the
market for order flow and in the market
for market data. The two are closely
linked: an exchange needs to consider
the negative impact on its order flow if
it raises the price of its market data.
Furthermore, new entrants have been
frequent over the past 10 years or so,
and these venues often give market data
away for free, serving as a check on
pricing by more established exchanges.
These are all the standard hallmarks of
a competitive market.’’ 38
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.39
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 platform
competition applies.
As the United States Supreme Court
recognized in Ohio v. American
Express, platforms are firms that act as
intermediaries between two or more sets
of agents, and typically the choices
made on one side of the platform affect
the results on the other side of the
platform via externalities, or ‘‘indirect
network effects.’’ 40 Externalities are
linkages between the different ‘‘sides’’
of a platform such that one cannot
understand pricing and competition for
goods or services on one side of the
platform in isolation; one must also
account for the influence of the other
side. As the Supreme Court explained:
To ensure sufficient participation, twosided platforms must be sensitive to the
prices that they charge each side. . . .
Raising the price on side A risks losing
participation on that side, which decreases
the value of the platform to side B. If the
37 Id.
38 Id.
at 39–40.
recently, Professors Jonathan Brogaard
and James Brugler also looked at the market for
proprietary market data products and confirmed
that it is competitive. The authors document that
introducing fees for market data leads to lower
market share, and identify informed traders as the
most affected trader categories after fees are
introduced. See Jonathan Brogaard and James
Brugler, Competition and Exchange Data Fees,
October 2, 2020 (Exhibit 3B).
40 Ohio v. American Express, 138 S. Ct. 2274,
2280–81 (2018).
39 More
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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.41
The Exchange and its affiliated
exchanges have long maintained that
they function as platforms between
consumers of market data and
consumers of trading services. Proving
the existence of linkages between the
two sides of this platform requires an indepth economic analysis of both public
data and confidential Exchange data
about particular customers’ trading
activities and market data purchases.
Exchanges, however, are prohibited
from sharing details about these specific
customer activities and purchases. For
example, pursuant to Exchange Rule
7.41E, transactions executed on the
Exchange are processed anonymously.
The Exchange and its affiliated
exchanges retained a third party expert,
Marc Rysman, Professor of Economics
Boston University, to analyze how
platform economics applies to stock
exchanges’ sale of market data products
and trading services, and to explain how
this affects the assessment of
competitive forces affecting the
exchanges’ data fees.42 Professor
Rysman was able to analyze exchange
data that is not otherwise publicly
available in a manner that is consistent
with the exchanges’ confidentiality
obligations to customers. As shown in
his paper, Professor Rysman surveyed
the existing economic literature
analyzing stock exchanges as platforms
between market data and trading
activities, and explained the types of
linkages between market data access
and trading activities that must be
present for an exchange to function as
a platform. In addition, Professor
Rysman undertook an empirical
analysis of customers’ trading activities
within the NYSE group of exchanges in
reaction to NYSE’s introduction in 2015
of the NYSE Integrated Feed, a full
order-by-order depth of book data
product.43
Professor Rysman’s analysis of this
confidential firm-level data shows that
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41 Id.
at 2281.
42 See Exhibit 3C, Marc Rysman, Stock Exchanges
as Platforms for Data and Trading, December 2,
2019 (hereinafter ‘‘Rysman Paper’’), ¶ 7.
43 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).
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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.44 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.45 This is the sort of
externality that is a key characteristic of
a platform market.46
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.’’ 47
• ‘‘[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.’’ 48
• 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.’’ 49
• ‘‘[E]mpirical evidence confirms that
stock exchanges are platforms for data
and trading.’’ 50
• ‘‘The platform nature of stock
exchanges means that data fees cannot
be analyzed in isolation, without
accounting for the competitive
dynamics in trading services.’’ 51
• ‘‘Competition is properly
understood as being between platforms
(i.e., stock exchanges) that balance the
44 Rysman
Paper ¶¶ 79–89.
45 Id. ¶¶ 90–91.
46 Id. ¶ 90.
47 Id. ¶ 95.
48 Id. ¶ 96.
49 Id.
50 Id. ¶ 97.
51 Id. ¶ 98.
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73561
needs of consumers of data and
traders.’’ 52
• ‘‘Data fees, data use, trading fees,
and order flow are all interrelated.’’ 53
• ‘‘Competition for order flow can
discipline the pricing of market data,
and vice-versa.’’ 54
• ‘‘As with platforms generally,
overall competition between exchanges
will limit their overall profitability, not
margins on any particular side of the
platform.’’ 55
c. Exchange Market Data Fees Are
Constrained by the Availability of
Substitute Platforms
Professor Rysman’s conclusions that
exchanges function as platforms for
market data and transaction services
mean that exchanges do not set fees for
market data products without
considering, and being constrained by,
the effect the fees will have on the
order-flow side of the platform. And as
the D.C. Circuit recognized in
NetCoalition I, ‘‘[n]o one disputes that
competition for order flow is fierce.’’ 56
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.’’ 57
As noted above, while Regulation
NMS has enhanced competition, it has
also fostered a ‘‘fragmented’’ market
structure where trading in a single stock
can occur across multiple trading
centers. When multiple trading centers
compete for order flow in the same
stock, the Commission has recognized
that ‘‘such competition can lead to the
fragmentation of order flow in that
stock.’’ 58 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.’’ 59 Indeed,
52 Id.
53 Id.
54 Id.
55 Id.
¶ 100.
56 NetCoalition
I, 615 F.3d at 544 (internal
quotation omitted).
57 Id.
58 See Securities Exchange Act Release No. 61358,
75 3594, 3597 (January 21, 2010) (File No. S7–02–
10) (Concept Release on Equity Market Structure).
59 Commission Division of Trading and Markets,
Memorandum to EMSAC, dated October 20, 2015,
available here: https://www.sec.gov/spotlight/
Continued
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today, equity trading is currently
dispersed across 16 exchanges,60
numerous alternative trading systems,61
broker-dealer internalizers and
wholesalers, all competing for order
flow. Based on publicly-available
information, no single exchange
currently has more than 18% market
share.62
Further, low barriers to entry mean
that new exchanges may, and do,
rapidly and inexpensively enter the
market and offer additional substitute
platforms to compete with the
Exchange.63 For example, in 2020 alone,
three new exchanges have entered the
market: Long Term Stock Exchange
(LTSE), which began operations as an
exchange on August 28, 2020; 64
Members Exchange (MEMX), which
began operations as an exchange on
September 29, 2020; 65 and Miami
International Holdings (MIAX), which
began operations of its first equities
exchange on September 29, 2020.66
These low barriers enable existing
exchange customers to disintermediate
and start their own exchanges if they
think the prices charged for exchange
proprietary market data products are too
high. This is precisely the rationale
behind the creation of MEMX, which
was formed by some of the largest and
most well capitalized financial firms
that are also Exchange customers
(including Bank of America, BlackRock,
emsac/memo-maker-taker-fees-on-equitiesexchanges.pdf.
60 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.
61 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.
62 See Cboe Global Markets U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/.
63 See Jones Paper at 10–11.
64 See LTSE Market Announcement: MA–2020–
020, dated August 14, 2020, announcing LTSE
production securities phase-in planned for August
28, available here: https://assets.ctfassets.net/
cchj2z2dcfyd/rnGvgggJUplaIk6N1xNA7/
41926d3925a177d6455868090c46aeda/MA-2020020__Production_Securities_Launching_August_
28_-_Google_Docs.pdf and LTSE Market
Announcement: MA–2020–025, available here:
https://assets.ctfassets.net/cchj2z2dcfyd/
52nIKwAuOraU1agaNY5j80/
0d27ab0eb9b540c67a5e9f831f23f0ac/MA-2020025.pdf.
65 As of October 29, 2020, MEMX is trading all
NMS symbols but has not yet enabled NMS routing.
See https://info.memxtrading.com/trader-alert-2010-memx-trading-symbols-update/.
66 See MIAX Pearl Press release, dated September
29, 2020, available here: https://
www.miaxoptions.com/sites/default/files/alert-files/
MIAX_Press_Release_09292020.pdf.
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Charles Schwab, Citadel, Citi, E*Trade,
Fidelity, Goldman Sachs, J.P. Morgan,
Jane Street, Morgan Stanley, TD
Ameritrade, and others).67
For example, one of MEMX’s
founding principles is that exchange
proprietary market data prices are too
high, and that MEMX will benefit its
members by offering ‘‘[l]ower pricing on
market data.’’ 68 Nor is this a new
phenomenon: Exchange customers
formed BATS to compete with
incumbent exchanges and once
registered as an exchange in 2008, BATS
did not initially charge for market data.
The BATS venture was a financial
success for its founders, first through
recouping their investment in its initial
public offering and then in the
subsequent sale of BATS to Cboe, which
now charges for market data from those
exchanges. Notably, MEMX has some of
the same founding broker-dealer
customers, leading some to dub MEMX
‘‘BATS 2.0.’’ 69
The fact that this cycle is viable and
repeatable by entities that both trade on
and compete with existing exchanges
confirms that barriers to entry are low
and that these markets are competitive
and contestable.70 And low barriers to
entry act as a market check on high
prices.71
67 MEMX Home Page (‘‘Founded by members and
investors, MEMX aims to drive simplicity,
efficiency, and competition in equity markets.’’),
available at https://memx.com/.
68 MEMX home page, available at https://
memx.com/.
69 See ‘‘MEMX turns up the heat on US stock
exchanges,’’ Financial Times, January 9, 2019,
available at https://www.ft.com/content/4908c8b01418-11e9-a581-4ff78404524e; see also ‘‘US
equities exchanges: If you can’t beat them, join
them,’’ Euromoney, February 13, 2019, available at
https://www.euromoney.com/article/
b1d3tfby4p3y4v/us-equities-exchanges-if-you-cantbeat-them-join-them.
70 United States v. SunGard Data Sys., 172 F.
Supp. 2d 172, 186 (D.D.C. 2001) (recognizing that
‘‘[a]s a matter of law, courts have generally
recognized that when a customer can replace the
services of an external product with an internallycreated system, this captive output (i.e., the selfproduction of all or part of the relevant product)
should be included in the same market.’’). In
SunGard, the court rejected the Antitrust Division’s
attempt to block SunGuard’s acquisition of the
disaster recovery assets of Comdisco on the basis
that the acquisition would ‘‘substantially lessen
competition in the market for shared hotsite
disaster recovery services,’’ when the evidence
showed that ‘‘internal hotsites’’ created by
customers competed with the ‘‘external shared
hotsite business’’ engaged in by the merging parties.
Id. at 173–74, 187.
71 United States v. Baker Hughes, 908 F.2d 981,
987 (1990) (‘‘In the absence of significant barriers
[to entry], a company probably cannot maintain
supracompetitive pricing for any length of time.’’);
see also David S. Evans and Richard Schmalensee,
Markets with Two-Sided Platforms, in 1 Issues In
Competition Law And Policy 667, 685 (ABA
Section of Antitrust Law 2008) (noting that
exchange mergers in 2005 and 2006 were approved
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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.72 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.73 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.74
In sum, the fierce competition for
order flow thus constrains any exchange
from pricing its market data at a
supracompetitive price, and constrains
the Exchange in setting its fees at issue
here.
The proposed fees are therefore
reasonable because in setting them, the
Exchange is constrained by the
availability of numerous substitute
platforms offering market data products
and trading. Such substitutes need not
be identical, but only substantially
similar to the product at hand.
More specifically, in reducing
specified fees for the NYSE American
BBO and NYSE American Trades
market data products, 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
by competition authorities in part in reliance on
planned and likely entry of other firms).
72 Rysman Paper ¶ 98.
73 See Jones Paper at 11.
74 In the context of the fee proposal that led to
the National IF Approval Order, supra note 33, one
commenter contended that trading was not a
platform with exchange proprietary market data,
and that the exchanges’ proprietary market data
products were instead ‘‘complements’’ for which
exchanges could charge supracompetitive prices.
Professor Rysman debunked these contentions in an
additional paper. See Marc Rysman, Complements,
Competition, and Exchange Proprietary Data
Products, August 13, 2020 (Exhibit 3D).
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order to establish reasonable fees. The
existence of numerous alternative
platforms to the Exchange’s platform
ensures that the Exchange cannot set
unreasonable market data fees without
suffering the negative effects of that
decision in the fiercely competitive
market for trading order flow.
d. The Availability of Substitute Market
Data Products Constrains Fees for NYSE
American BBO, NYSE American Trades,
and NYSE BQT
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Even putting aside the facts that
exchanges are platforms and that pricing
decisions on the two sides of the
platform are intertwined, the Exchange
is constrained in setting the proposed
market data fees by the availability of
numerous substitute market data
products. The Commission has been
clear that substitute products need not
be identical, but only substantially
similar to the product at hand.75
The NYSE BQT market data product
is subject to significant competitive
forces that constrain its pricing.
Specifically, as described above, NYSE
BQT competes head-to-head with the
Nasdaq Basic product and the Cboe One
Feed. These products each serve as
reasonable substitutes for one another as
they are each designed to provide
investors with a unified view of realtime quotes and last-sale prices in all
Tape A, B, and C securities. Each
product provides subscribers with
consolidated top-of-book quotes and
trades from multiple U.S. equities
markets. In the case of NYSE BQT, this
product provides top-of-book quotes
and trades data from five NYSEaffiliated U.S. equities exchanges, which
together account for approximately 22%
of consolidated U.S. equities trading
volume as of September 2020.76 Cboe
One Feed similarly provides top-of-book
quotes and trades data from Cboe’s four
U.S. equities exchanges. NYSE BQT,
Nasdaq Basic, and Cboe One Feed are
all intended to provide indicative
75 For example, in the National IF Approval
Order, the Commission recognized that for some
customers, the best bid and offer information from
consolidated data feeds may function as a substitute
for the NYSE National Integrated Feed product,
which contains order by order information. See
National IF Approval Order, supra note 33, at 67397
[release p. 21] (‘‘[I]nformation provided by NYSE
National demonstrates that a number of executing
broker-dealers do not subscribe to the NYSE
National Integrated Feed and executing brokerdealers can otherwise obtain NYSE National best
bid and offer information from the consolidated
data feeds.’’ (internal quotations omitted)).
76 See Cboe Global Markets U.S. Equities Market
Volume Summary, available at https://
markets.cboe.com/us/equities/market_share/
market/2019-10-31/.
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pricing and are not intended to be used
for order routing or trading decisions.
In addition to competing with
proprietary data products from Nasdaq
and Cboe, NYSE BQT also competes
with the consolidated data feed.
However, the Exchange does not claim
that NYSE BQT is a substitute for
consolidated data with respect to
requirements under the Vendor Display
Rule, which is Regulation NMS Rule
603(c).
The fact that this filing is proposing
reductions in certain fees and fee
waivers is itself confirmation of the
inherently competitive nature of the
market for the sale of proprietary market
data. For example, in August 2019, Cboe
filed proposed rule changes to reduce
certain of its Cboe One Feed fees and
noted that it attracted two additional
customers because of the reduced fees.77
77 See Securities Exchange Act Release Nos.
86667 (August 14, 2019) (SR–CboeBZX–2019–069);
86670 (August 14, 2019) (SR–CboeBYX–2019–012);
86676 (August 14, 2019) (SR–CboeEDGA–2019–
013); and 86678 (August 14, 2019) (SR–CboeEDGX–
2019–048) (Notices of filing and Immediate
effectiveness of proposed rule change to reduce fees
for the Cboe One Feed) (collectively ‘‘Cboe One Fee
Filings’’). The Cboe One Fee Filings were in effect
from August 1, 2019 until September 30, 2019,
when the Commission suspended them and
instituted proceedings to determine whether to
approve or disapprove those proposals. See, e.g.,
Securities Exchange Act Release No. 87164
(September 30, 2019), 84 FR 53208 (October 4,
2019) (SR–CboeBZX–2019–069). On October 1,
2019, the Cboe equities exchanges refiled the Cboe
One Fee Filings on the basis that they had new
customers subscribe as a result of the Cboe One Fee
Filings, and therefore its fee proposal had increased
competition for top-of-book market data. See
Securities Exchange Act Release Nos. 87312
(October 15, 2019), 84 FR 56235 (October 21, 2019)
(SR–CboeBZX–2019–086); 87305 (October 14,
2019), 84 FR 56210 (October 21, 2019) (SR–
CboeBYX–2019–015); 87295 (October 11, 2019), 84
FR 55624 (October 17, 2019) (SR–CboeEDGX–2019–
059); and 87294 (October 11, 2019), 84 FR 55638
(October 17, 2019) (SR–CboeEDGA–2019–015)
(Notices of filing and immediate effectiveness of
proposed rule changes to re-file the Small Retail
Broker Distribution Program) (‘‘Cboe One Fee ReFilings’’). On November 26, 2019, the Commission
suspended the Cboe One Fee Re-Filings and
instituted proceedings to determine whether to
approve or disapprove those proposals. See, e.g.,
Securities Exchange Act Release No. 87629
(November 26, 2019), 84 FR 66245 (December 3,
2019) (SR–CboeBZX–2019–086). On November 27,
2019, the Cboe equities exchanges refiled the Cboe
One Fee Filings with one revision to the
requirements for participating in the Small Retail
Broker Distribution Program and additional
information about the basis for the proposed fee
changes. See Securities Exchange Act Release Nos.
87712 (December 10, 2019), 84 FR 68508 (December
16, 2019) (SR–CboeBZX–2019–101); 88713
(December 10, 2019), 84 FR 68530 (December 16,
2019) (SR–CboeBYX–2019–023); 87709 (December
10, 2019), 84 FR 68523 (December 16, 2019) (SR–
CboeEDGA–2019–021); and 87711 (December 10,
2019), 84 FR 68501 (December 16, 2019) (SR–Cboe–
EDGX–2019–071) (Notices of filing and immediate
effectiveness of proposed rule changes to introduce
a Small Retail Broker Distribution Program) (‘‘Cboe
One Third Fee Re-Filings’’). On February 4, 2020,
the Cboe equities exchanges withdrew the Cboe
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73563
More recently, Nasdaq filed a proposed
rule change to lower the enterprise
license fee for broker-dealers
distributing Nasdaq Basic to internal
Professional subscribers and the
enterprise license fee for broker-dealers
distributing Nasdaq Last Sale to
Professional subscribers.78
The Exchange notes that NYSE
American BBO, NYSE American Trades,
and NYSE BQT are entirely optional.
The Exchange is not required to make
the proprietary data products that are
the subject of this proposed rule change
available or to offer any specific pricing
alternatives to any customers, nor is any
firm or investor required to purchase the
Exchange’s data products. Unlike some
other data products (e.g., the
consolidated quotation and last-sale
information feeds) that firms are
required to purchase in order to fulfil
regulatory obligations,79 a customer’s
decision whether to purchase any of the
Exchange’s proprietary market data
feeds is entirely discretionary. Most
firms that choose to subscribe to
proprietary market data feeds from the
Exchange and its affiliates do so for the
primary goals of using them to increase
their revenues, reduce their expenses,
and in some instances compete directly
with the Exchange’s trading services.
Such firms are able to determine for
One Third Fee Re-Filings and, on the same date,
refiled the Cboe One Fee Filings. See Securities
Exchange Act Release Nos. 88221 (February 14,
2020), 85 FR 9904 (February 20, 2020) (SR–
CboeBYX–2020–007); 88218 (February 14, 2020), 85
FR 9827 (February 20, 2020) (SR–CboeBZX–2020–
014); 88220 (February 14, 2020), 85 FR 9912
(February 20, 2020) (SR–CboeEDGA–2020–004);
and 88219 (February 14, 2020), 85 FR 9872
(February 20, 2020) (SR–CboeEDGX–2020–008)
(Notices of filing and immediate effectiveness of
proposed rule changes to introduce a Small Retail
Broker Distribution Program) (‘‘Cboe One Fourth
Fee Re-Filings’’). On April 15, 2020, the Cboe
equities exchanges withdrew the Cboe One Fee
Filings and the Cboe One Fee Re-Filings. Pursuant
to the Cboe One Fourth Fee Re-Filings, the Small
Retail Broker Distribution Program is currently in
effect at the Cboe equities exchanges.
78 See Securities Exchange Act Release No. 90177
(October 14, 2020), 85 FR 66620 (October 20, 2020)
(SR–NASDAQ–2020–065) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
To Lower the Enterprise License Fee for BrokerDealers Distributing Nasdaq Basic to Internal
Professional Subscribers as Set Forth in the Equity
7 Pricing Schedule, Section 147, and the Enterprise
License Fee for Broker-Dealers Distributing Nasdaq
Last Sale to Professional Subscribers at Equity 7,
Section 139).
79 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.
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themselves whether or not the products
in question or any other similar
products are attractively priced. If
market data feeds from the Exchange
and its affiliates do not provide
sufficient value to firms based on the
uses those firms may have for it, such
firms may simply choose to conduct
their business operations in ways that
do not use the products.80
In addition, in the case of products
that are also redistributed through
market data vendors, such as Bloomberg
and Refinitiv, the vendors themselves
provide additional price discipline for
proprietary data products because they
control the primary means of access to
certain end users. These vendors impose
price discipline based upon their
business models. For example, vendors
that assess a surcharge on data they sell
are able to refuse to offer proprietary
products that their end users do not or
will not purchase in sufficient numbers.
This competitive constraint is precisely
what is driving the proposed fee
changes here, which are designed to
attract new market data vendors, and
through them new subscribers, to the
NYSE BQT product. Currently, only
four vendors subscribe to NYSE BQT,
and each vendor has limited
redistribution of NYSE BQT. No other
vendors currently subscribe to NYSE
BQT and likely will not unless their
customers request it, and customers will
not elect to pay the proposed fees unless
such product can provide value by
sufficiently increasing revenues or
reducing costs in the customer’s
business in a manner that will offset the
fees. All of these factors operate as
constraints on pricing proprietary data
products.
Because of the availability of
substitutes, an exchange that overprices
its market data products stands a high
risk that users may substitute another
source of market data information for its
own. Those competitive pressures
imposed by available alternatives are
evident in the Exchange’s proposed
pricing.
In setting the proposed fees, the
Exchange considered the
competitiveness of the market for
proprietary data and all of the
implications of that competition. The
Exchange believes that it has considered
all relevant factors and has not
considered irrelevant factors in order to
establish reasonable fees. The existence
of numerous alternatives to the
Exchange’s platform and, more
specifically, alternatives to the market
data products, including proprietary
data from other sources, ensures that the
80 See
generally Jones Paper at 8, 10–11.
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Exchange cannot set unreasonable fees
when vendors and subscribers can elect
these alternatives or choose not to
purchase a specific proprietary data
product if the attendant fees are not
justified by the returns that any
particular vendor or data recipient
would achieve through the purchase.
2. The Proposed Fees Are Reasonable
The specific fees that the Exchange
proposes for NYSE American BBO and
NYSE American Trades are reasonable,
for the following additional reasons.
Overall. This proposed fee change is
a result of the competitive environment,
as the Exchange seeks to decrease
certain of its fees to attract
Redistributors that do not currently
subscribe to the NYSE BQT market data
product. The Exchange is proposing the
fee reductions at issue to make the
Exchange’s fees more competitive for a
specific segment of market participants,
thereby increasing the availability of the
Exchange’s data products, and
expanding the options available to firms
making data purchasing decisions based
on their business needs. The Exchange
believes that this is consistent with the
principles contained in Regulation NMS
to ‘‘promote the wide availability of
market data and to allocate revenues to
SROs that produce the most useful data
for investors.’’ 81
Access Fee. By making the reduced
Per User Access Fee available to
Redistributors that subscribe only to the
NYSE American BBO and NYSE
American Trades data feeds and NYSE
BQT and do not have any internal use
of such products, and do not subscribe
to any other products listed on the Fee
Schedule, the Exchange believes that
more Redistributors may choose to
subscribe to these products, thereby
expanding the distribution of this
market data for the benefit of investors
that participate in the national market
system and increasing competition
generally. The Exchange also believes
that offering the Per User Access Fee to
these Redistributors would expand the
availability of NYSE BQT to potential
data recipients that are interested in
subscribing to NYSE BQT but do not
have access to a Redistributor who
subscribes to the data feeds.
The Exchange determined to make the
reduced Per User Access Fee available
to these Redistributors because it
constitutes a substantial reduction of the
current fee, with the intended purpose
of increasing use of NYSE BQT by
Redistributors that do not currently
subscribe to any NYSE American market
81 See Regulation NMS Adopting Release, 70 FR
37495, at 37503.
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data products. NYSE BQT has been in
place since 2014 but has a very small
number of subscribers. The Exchange
believes that in order to compete with
other indicative pricing products such
as Nasdaq Basic and Cboe One Feed, it
needs to provide a meaningful financial
incentive for more Redistributors to
choose to subscribe to NYSE BQT so
that they can make it available to their
customers. Accordingly, the proposed
reduction to the access fees for NYSE
American BBO and NYSE American
Trades, together with the proposed
reduction to the access fees for NYSE
BBO, NYSE Trades, NYSE Arca BBO,
and NYSE Arca Trades, is reasonable
because the reductions will make NYSE
BQT a more attractive offering for
Redistributors that do not currently
subscribe to any NYSE American market
data products and make it more
competitive with Nasdaq Basic and
Cboe One Feed. For example, the
External Distribution Fee for Cboe One
Feed is currently $5,000 (which is the
sum of the External Distribution fees for
the four exchange data products that are
included in Cboe One Feed) plus a Data
Consolidation Fee of $1,000, for a total
of $6,000. Evidence of the competition
among exchange groups for these
products has previously been
demonstrated via fee changes. For
example, following the introduction of
the Cboe One Feed, Nasdaq responded
by reducing its fees for the Nasdaq Basic
product.82 With the proposed changes
by the Exchange, NYSE, and NYSE
Arca, the Exchange is similarly seeking
to compete by decreasing the total
access fees for NYSE BQT from $6,250
to $850 for Redistributors that do not
currently subscribe to any NYSE
American market data products and
have customers that are interested in
subscribing to NYSE BQT but cannot do
so until their Redistributor also
subscribes. This proposed rule change
therefore demonstrates the existence of
an effective, competitive market because
this proposal resulted from a need to
generate innovative approaches in
response to competition from other
exchanges that offer market data for a
specific segment of market participants.
82 See e.g., Securities Exchange Act Release No.
83751 (July 31, 2018), 83 FR 38428 (August 6, 2018)
(SR–NASDAQ–2018–058) (Notice of Filing and
Immediate Effectiveness of Proposed Rule Change
To Lower Fees and Administrative Costs for
Distributors of Nasdaq Basic, Nasdaq Last Sale, NLS
Plus and the Nasdaq Depth-of-Book Products
Through a Consolidated Enterprise License).
Nasdaq filed the proposed fee change to lower the
Enterprise Fee for Nasdaq Basic and other market
data products in response to the Enterprise Fee for
the Cboe One Feed adopted by Cboe family of
exchanges.
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Redistribution Fees. Similarly, the
proposed waiver of the NYSE American
Trades Redistribution Fee is reasonable
because it is designed to provide an
incentive for Redistributors to make
NYSE BQT available so that data
recipients can subscribe to NYSE BQT.
The Exchange further believes that the
proposed waiver of the NYSE American
Trades Redistribution Fee is reasonable
because it is designed to compete with
market data products offered by the
Cboe family of equity exchanges.83
For all of the foregoing reasons, the
Exchange believes that the proposed
fees are reasonable.
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The Proposed Fees Are Equitably
Allocated
The Exchange believes the proposed
fees for NYSE American BBO and NYSE
American Trades are allocated fairly
and equitably among the various
categories of users of the feed, and any
differences among categories of users
are justified.
Overall. As noted above, this
proposed fee change is a result of the
competitive environment for market
data products that provide indicative
pricing information across a family of
exchanges. To respond to this
competitive environment, the Exchange
seeks to amend its fees to access NYSE
American BBO and NYSE American
Trades for Redistributors that would be
subscribing only to the NYSE American
BBO and NYSE American Trades data
feeds and would use these market data
products for external distribution only,
which the Exchange hopes will attract
new Redistributor subscribers for the
NYSE BQT market data product so that
the product can be made available to
prospective market data recipients. The
Exchange is proposing the fee
reductions to make the Exchange’s fees
more competitive for a specific segment
of market participants, thereby
increasing the availability of the
Exchange’s data products, expanding
the options available to firms making
data purchasing decisions based on
their business needs, and generally
increasing competition.
Access Fee. The Exchange believes
that making the Per User Access Fee
available to Redistributors that would be
subscribing only to the NYSE American
83 See, e.g., BZX Price List—U.S. Equities
available at https://www.nasdaqtrader.com/
Trader.aspx?id=DPUSdata#db. BZX charges $500
per month for internal distribution, and $2,500 per
month for external distribution, of BZX Last Sale.
BZX also charges $500 per month for internal
distribution, and $2,500 per month for external
distribution, of BZX Top. See Cboe BZX U.S.
Equities Exchange Fee Schedule at https://
markets.cboe.com/us/equities/membership/fee_
schedule/bzx/.
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BBO and NYSE American Trades data
feeds and would use these market data
products for external distribution only
is equitable as it would apply equally to
all data recipients that choose to
subscribe to NYSE American BBO or
NYSE American Trades for external
distribution only and who do not
subscribe to any other products listed
on the Fee Schedule. Because NYSE
American BBO and NYSE American
Trades are optional products, any data
recipient could choose to subscribe only
to NYSE American BBO or NYSE
American Trades to distribute externally
and be eligible for the proposed reduced
fee. The Exchange does not believe that
it is inequitable that this proposed fee
reduction would be available only to
data recipients that subscribe only to
NYSE American BBO or NYSE
American Trades and only for external
distribution. Internal use of data
represents a different set of use cases
than a Redistributor that is engaged only
in external distribution of data. For
example, non-display data can be used
by data recipients for a wide variety of
profit-generating purposes, including
proprietary and agency trading and
smart order routing, as well as by data
recipients that operate order matching
and execution platforms that compete
directly with the Exchange for order
flow. The data also can be used for a
variety of non-trading purposes that
indirectly support trading, such as risk
management and compliance. Although
some of these non-trading uses do not
directly generate revenues, they can
nonetheless substantially reduce the
recipient’s costs by automating such
functions so that they can be carried out
in a more efficient and accurate manner
and reduce errors and labor costs,
thereby benefiting end users. The
Exchange believes that charging a
different access fee for a Redistributor
that is engaged solely in external
distribution of only the NYSE American
BBO and NYSE American Trades
products is equitable because it would
make NYSE BQT available to more data
recipients that are customers of such
Redistributors and who would not
otherwise be able to access NYSE BQT
if their Redistributor did not subscribe
to and redistribute NYSE BQT.
Redistribution Fees. The Exchange
believes the proposed change to provide
a waiver of the Redistribution Fee to a
Redistributor that would be eligible for
the Per User Access Fee because it only
externally redistributes NYSE American
Trades to at least one data feed recipient
is equitably allocated. The proposed
change would apply equally to all
Redistributors that are eligible for the
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73565
Per User Access Fee and choose to
externally redistribute the NYSE
American Trades product, and would
serve as an incentive for Redistributors
to make NYSE American Trades more
broadly available for use by both
Professional and Non-Professional
Users. This, in turn, could provide an
incentive for Redistributors that do not
currently subscribe to any NYSE
American market data products to
subscribe to NYSE BQT and make it
available to their customers.
For all of the foregoing reasons, the
Exchange believes that the proposed
fees for the NYSE American market data
products are equitably allocated.
The Proposed Fees Are Not Unfairly
Discriminatory
The Exchange believes the proposed
fees are not unfairly discriminatory
because any differences in the
application of the fees are based on
meaningful distinctions between
customers, and those meaningful
distinctions are not unfairly
discriminatory between customers.
Overall. As noted above, this
proposed fee change is a result of the
competitive environment for market
data products that provide indicative
pricing information across a family of
exchanges. To respond to this
competitive environment, the Exchange
seeks to amend its fees to provide a
financial incentive for Redistributors
that do not currently subscribe to any
NYSE American market data products
that decide to subscribe to NYSE BQT,
which the Exchange hopes will attract
more subscribers for the NYSE BQT
market data product. The Exchange is
proposing the fee reductions to make
the Exchange’s fees more competitive
for a specific segment of market
participants, thereby increasing the
availability of the Exchange’s data
products, expanding the options
available to firms making data
purchasing decisions based on their
business needs, and generally increasing
competition.
Access Fee. The Exchange believes
that making the Per User Access Fee
available to Redistributors that would be
subscribing only to the NYSE American
BBO and NYSE American Trades data
feeds and would use these market data
products for external distribution only
is not unfairly discriminatory as it
would apply equally to all
Redistributors that choose to subscribe
to NYSE American BBO or NYSE
American Trades for external
distribution only and who do not
subscribe to any other products listed
on the Fee Schedule. Because NYSE
American BBO and NYSE American
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Trades are optional products, any data
recipient could choose to subscribe only
to NYSE American BBO or NYSE
American Trades to distribute externally
and be eligible for the proposed reduced
fee. The Exchange does not believe that
it is unfairly discriminatory that this
proposed fee reduction would be
available only to data recipients that
subscribe only to NYSE American BBO
or NYSE American Trades and only for
external distribution. Internal use of
data represents a different set of use
cases than a Redistributor that is
engaged only in external distribution of
data. For example, non-display data can
be used by data recipients for a wide
variety of profit-generating purposes,
including proprietary and agency
trading and smart order routing, as well
as by data recipients that operate order
matching and execution platforms that
compete directly with the Exchange for
order flow. The data also can be used for
a variety of non-trading purposes that
indirectly support trading, such as risk
management and compliance. While
some of these non-trading uses do not
directly generate revenues, they can
nonetheless substantially reduce the
recipient’s costs by automating such
functions so that they can be carried out
in a more efficient and accurate manner
and reduce errors and labor costs,
thereby benefiting end users. The
Exchange therefore believes that there is
a meaningful distinction between
internal use and redistribution of market
data and that charging a different access
fee to a Redistributor that is engaged
solely in external distribution of only
the NYSE American BBO and NYSE
American Trades products is not
unfairly discriminatory because it
would make NYSE BQT available to
more data recipients that are customers
of such Redistributors and who would
not otherwise be able to access NYSE
BQT if their Redistributor did not
subscribe to and redistribute NYSE
BQT.
Moreover, the Exchange does not
believe that it is unfairly discriminatory
to offer the Per User Access Fee only to
those Redistributors that would
subscribe only to the NYSE American
BBO and NYSE American Trades data
feeds and no other products on the Fee
Schedule, and only for external
distribution. The Exchange does not
currently have any Redistributors that
fit this description. This proposed rule
change is designed to provide an
incentive for Redistributors that do not
currently subscribe to NYSE BQT or any
other products listed on the Fee
Schedule, but have customers that are
interested in subscribing to NYSE BQT,
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to subscribe to the NYSE American BBO
and NYSE American Trades data feeds
so that they can make NYSE BQT
available to their customers. This fee
incentive is not necessary for
Redistributors that currently subscribe
to the NYSE American BBO and NYSE
American Trades data feeds because
such Redistributors could already
subscribe to NYSE BQT, but have
chosen not to, and a reduction in their
existing access fees would likely not
result in such Redistributors choosing to
subscribe to NYSE BQT.
Redistribution Fees. The Exchange
believes the proposed change to provide
a waiver of the Redistribution Fee to a
Redistributor that would be eligible for
the Per User Access Fee because it only
externally redistributes NYSE American
Trades to at least one data recipient is
not unfairly discriminatory. The
proposed waiver would apply equally to
all Redistributors that are eligible for the
Per User Access Fee and choose to
externally redistribute the NYSE
American Trades product, and would
serve as an incentive for Redistributors
that do not currently subscribe to any
NYSE American market data products to
subscribe to NYSE American Trades and
then make NYSE BQT available to their
customers.
For all of the foregoing reasons, the
Exchange believes that the proposed
fees are not unfairly discriminatory.
B. Self-Regulatory Organization’s
Statement on Burden on Competition
The Exchange does not believe that
the proposed rule change will impose
any burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act. Indeed, as
demonstrated above, the Exchange
believes the proposed rule changes are
pro-competitive.
Intramarket Competition. The
Exchange believes that the proposed
fees do not put any market participants
at a relative disadvantage compared to
other market participants. As noted
above, the proposed fee schedule would
apply to all subscribers of NYSE
American market data products, and
customers may not only choose whether
to subscribe to the products at all, but
also may tailor their subscriptions to
include only the products and uses that
they deem suitable for their business
needs. The Exchange also believes that
the proposed fees neither favor nor
penalize one or more categories of
market participants in a manner that
would impose an undue market on
competition. As shown above, to the
extent that particular proposed fees
apply to only a subset of subscribers,
those distinctions are not unfairly
PO 00000
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Sfmt 4703
discriminatory and do unfairly burden
one set of customers over another.
Intermarket Competition. The
Exchange believes that the proposed
fees do not impose a burden on
competition on other exchanges that is
not necessary or appropriate; indeed,
the Exchange believes the proposed fee
changes would have the effect of
increasing competition. As
demonstrated above and in Professor
Rysman’s paper, exchanges are
platforms for market data and trading. In
setting the proposed fees, the Exchange
is constrained by the availability of
substitute platforms also offering market
data products and trading, and low
barriers to entry mean new exchange
platforms are frequently introduced.
The fact that exchanges are platforms
ensures that no exchange can make
pricing decisions for one side of its
platform without considering, and being
constrained by, the effects that price
will have on the other side of the
platform. In setting fees at issue here,
the Exchange is constrained by the fact
that, if its pricing across the platform is
unattractive to customers, customers
will have its pick of an increasing
number of alternative platforms to use
instead of the Exchange. Given this
intense competition between platforms,
no one exchange’s market data fees can
impose an unnecessary burden on
competition, and the Exchange’s
proposed fees do not do so here.
In addition, the Exchange believes
that the proposed fees do not impose a
burden on competition or on other
exchanges that is not necessary or
appropriate because of the availability
of numerous substitute market data
products. Specifically, as described
above, NYSE BQT competes head-tohead with the Nasdaq Basic product and
the Cboe One Feed. These products each
serve as reasonable substitutes for one
another as they are each designed to
provide investors with a unified view of
real-time quotes and last-sale prices in
all Tape A, B, and C securities. Each
product provides subscribers with
consolidated top-of-book quotes and
trades from multiple U.S. equities
markets. NYSE BQT provides top-ofbook quotes and trades data from five
NYSE-affiliated U.S. equities exchanges,
while Cboe One Feed similarly provides
top-of-book quotes and trades data from
Cboe’s four U.S. equities exchanges.
NYSE BQT, Nasdaq Basic, and Cboe
One Feed are all intended to provide
indicative pricing and therefore, are
reasonable substitutes for one another.
Additionally, market data vendors are
also able to offer close substitutes to
NYSE BQT. Because market data users
can find suitable substitute feeds, an
E:\FR\FM\18NON1.SGM
18NON1
Federal Register / Vol. 85, No. 223 / Wednesday, November 18, 2020 / Notices
exchange that overprices its market data
products stands a high risk that users
may substitute another source of market
data information for its own. These
competitive pressures ensure that no
one exchange’s market data fees can
impose an unnecessary burden on
competition, and the Exchange’s
proposed fees do not do so here.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective
upon filing pursuant to Section
19(b)(3)(A) 84 of the Act and
subparagraph (f)(2) of Rule 19b–4 85
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) 86 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
khammond on DSKJM1Z7X2PROD with NOTICES
IV. Solicitation of Comments
Commission, 100 F Street NE,
Washington, DC 20549–1090.
SECURITIES AND EXCHANGE
COMMISSION
All submissions should refer to File
Number SR–NYSEAMER–2020–79. 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–NYSEAMER–2020–79, and
should be submitted on or before
December 9, 2020.
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:
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.87
J. Matthew DeLesDernier,
Assistant Secretary.
Electronic Comments
BILLING CODE 8011–01–P
[FR Doc. 2020–25390 Filed 11–17–20; 8:45 am]
[Release No. 34–90410; File No. SR–
NYSEAMER–2020–80]
Self-Regulatory Organizations; NYSE
American LLC; Notice of Filing and
Immediate Effectiveness of Proposed
Change To Amend the NYSE American
Options Fee Schedule Regarding the
Amount of Rebates for Initiating a
Complex Customer Best Execution
Auction
November 12, 2020.
Pursuant to Section 19(b)(1) 1 of the
Securities Exchange Act of 1934 (the
‘‘Act’’) 2 and Rule 19b–4 thereunder,3
notice is hereby given that, on
November 2, 2020, NYSE American LLC
(‘‘NYSE American’’ or the ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (the ‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange proposes to amend the
NYSE American Options Fee Schedule
(‘‘Fee Schedule’’) regarding the amount
of rebates for initiating a Complex
Customer Best Execution Auction. The
Exchange proposes to implement the fee
change effective November 2, 2020. The
proposed 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.
• 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–
NYSEAMER–2020–79 on the subject
line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
U.S.C. 78s(b)(3)(A).
CFR 240.19b–4(f)(2).
86 15 U.S.C. 78s(b)(2)(B).
84 15
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CFR 200.30–3(a)(12).
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]]>Agencies
[Federal Register Volume 85, Number 223 (Wednesday, November 18, 2020)]
[Notices]
[Pages 73556-73567]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-25390]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90408; File No. SR-NYSEAMER-2020-79]
Self-Regulatory Organizations; NYSE American, LLC; Notice of
Filing and Immediate Effectiveness of Proposed Rule Change Amending the
Fees for NYSE American BBO and NYSE American Trades by Modifying the
Application of the Access Fee and Amending the Fees for NYSE American
Trades by Adopting a Waiver Applicable to the Redistribution Fee
November 12, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(the
[[Page 73557]]
``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 2, 2020, NYSE American, LLC (``NYSE American'' or the
``Exchange'') filed with the Securities and Exchange Commission (the
``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the Exchange. The
Commission is publishing this notice to solicit comments on the
proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange proposes to (1) amend the fees for NYSE American BBO
and NYSE American Trades by modifying the application of the Access
Fee; and (2) amend the fees for NYSE American Trades by adopting a
waiver applicable to the Redistribution Fee. The Exchange proposes to
implement the proposed fee changes on January 1, 2021. 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 the
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange proposes to decrease the fees for certain NYSE
American market data products, as set forth on the NYSE American
Proprietary Market Data Fee Schedule (``Fee Schedule''). These fee
decreases, taken together with similar fee decreases filed by the
Exchange's affiliated exchanges, New York Stock Exchange LLC (``NYSE'')
and NYSE Arca, Inc. (``NYSE Arca''),\3\ will reduce the fees associated
with the NYSE BQT proprietary data product, which competes directly
with similar products offered by both the Nasdaq and Cboe families of
U.S. equity exchanges. Collectively, the proposed fee decreases are
intended to respond to the competition posed by similar products
offered by the other exchange groups.
---------------------------------------------------------------------------
\3\ See SR-NYSE-2020-91 and SR-NYSEArca-2020-95.
---------------------------------------------------------------------------
Specifically, the Exchange proposes to (1) reduce the Access Fees
by more than 93% for Redistributors \4\ of NYSE American BBO and NYSE
American Trades that subscribe to only such data feeds and do not
subscribe to any other market data product listed on the Fee Schedule,
and use such market data products for external distribution only; and
(2) waive the Redistribution Fee for Redistributors that are eligible
for the Per User Access Fee if the Redistributor provides NYSE American
Trades externally to at least one data feed recipient and reports such
recipient to the Exchange. All of the proposed changes would decrease
fees for market data on the Exchange.
---------------------------------------------------------------------------
\4\ A Redistributor is a vendor or any other person that
provides a NYSE data product to a data recipient or to any system
that a data recipient uses, irrespective of the means of
transmission or access.
---------------------------------------------------------------------------
The Exchange proposes to implement these proposed fee changes on
January 1, 2021.
Background
The Commission has repeatedly expressed its preference for
competition over regulatory intervention in determining prices,
products, and services in the securities markets. In Regulation NMS,
the Commission highlighted the importance of market forces in
determining prices and SRO revenues, and also recognized that current
regulation of the market system ``has been remarkably successful in
promoting market competition in its broader forms that are most
important to investors and listed companies.'' \5\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 51808 (June 9,
2005), 70 FR 37495, 37499 (June 29, 2005) (S7-10-04) (Final Rule)
(``Regulation NMS Adopting Release'').
---------------------------------------------------------------------------
While Regulation NMS has enhanced competition, it has also fostered
a ``fragmented'' market structure where trading in a single stock can
occur across multiple trading centers. When multiple trading centers
compete for order flow in the same stock, the Commission has recognized
that ``such competition can lead to the fragmentation of order flow in
that stock.'' \6\ Indeed, equity trading is currently dispersed across
16 exchanges,\7\ numerous alternative trading systems,\8\ and broker-
dealer internalizers and wholesalers, all competing for order flow.
Based on publicly-available information, no single exchange currently
has more than 18% market share (whether including or excluding auction
volume).\9\
---------------------------------------------------------------------------
\6\ See Securities Exchange Act Release No. 61358, 75 FR 3594,
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on
Equity Market Structure).
\7\ See Cboe Global Markets, U.S. Equities Market Volume
Summary, available at https://markets.cboe.com/us/equities/market_share/. See generally https://www.sec.gov/fast-answers/divisionsmarketregmrexchangesshtml.html.
\8\ See FINRA ATS Transparency Data, available at https://otctransparency.finra.org/otctransparency/AtsIssueData. A list of
alternative trading systems registered with the Commission is
available at https://www.sec.gov/foia/docs/atslist.htm.
\9\ See Cboe Global Markets U.S. Equities Market Volume Summary,
available at https://markets.cboe.com/us/equities/market_share/.
---------------------------------------------------------------------------
With the NYSE BQT market data product, NYSE American and its
affiliates compete head to head with the Nasdaq Basic \10\ and Cboe One
Feed \11\ market data products. Similar to those market data products,
NYSE BQT, which was established in 2014,\12\ consists of certain
elements from the NYSE American BBO and NYSE American Trades market
data products as well as from market data products from the Exchange's
affiliates, NYSE, NYSE Arca, NYSE Chicago, Inc. (``NYSE Chicago''),\13\
and NYSE National, Inc. (``NYSE National'').\14\ Similar to both Nasdaq
Basic and the Cboe One Feed, NYSE BQT provides investors with a unified
view of comprehensive last sale and BBO data in all Tape A, B, and C
securities that trade on the Exchange, NYSE, NYSE Arca, NYSE Chicago,
and
[[Page 73558]]
NYSE National. Also similar to Nasdaq Basic and the Cboe One Feed, NYSE
BQT is not intended to be used for purposes of making order-routing or
trading decisions, but rather provides indicative prices for Tape A, B,
and C securities.\15\
---------------------------------------------------------------------------
\10\ As described on the Nasdaq website, available here: https://www.nasdaqtrader.com/Trader.aspx?id=nasdaqbasic, Nasdaq Basic is a
``low cost alternative'' that provides ``Best Bid and Offer and Last
Sale information for all U.S. exchange-listed securities based on
liquidity within the Nasdaq market center, as well as trades
reported to the FINRA Trade Reporting Facility (``TRF'').''
\11\ As described on the Cboe website, available here: https://markets.cboe.com/us/equities/market_data_services/cboe_one/, the
Cboe One Feed is a ``market data product that provides cost-
effective, high-quality reference quotes and trade data for market
participants looking for comprehensive, real-time market data'' and
provides a ``unified view of the market from all four Cboe equity
exchanges: BZX Exchange, BYX Exchange, EDGX Exchange, and EDGA
Exchange.''
\12\ See Securities Exchange Act Release Nos. 72750 (August 4,
2014), 79 FR 46494 (August 8, 2014) (notice--NYSE BQT); and 73553
(November 6, 2014), 79 FR 67491 (November 13, 2014) (approval
order--NYSE BQT) (SR-NYSE-2014-40) (``NYSE BQT Filing'').
\13\ In 2019, NYSE BQT was amended to include NYSE Chicago BBO
and NYSE Chicago Trades. See Securities Exchange Act Release No.
87511 (November 12, 2019), 84 FR 63689 (November 18, 2019) (SR-NYSE-
2019-60).
\14\ In 2018, NYSE BQT was amended to include NYSE National BBO
and NYSE National Trades. See Securities Exchange Act Release No.
83359 (June 1, 2018), 83 FR 26507 (June 7, 2018) (SR-NYSE-2018-22).
\15\ See NYSE BQT Filing, supra note 13.
---------------------------------------------------------------------------
Currently, to subscribe to NYSE BQT, subscribers are charged an
access fee of $250 per month.\16\ Additionally, subscribers must also
subscribe to, and pay applicable fees for NYSE American BBO, NYSE
American Trades, NYSE BBO, NYSE Trades, NYSE Arca BBO, NYSE Arca
Trades, NYSE Chicago BBO, NYSE Chicago Trades, NYSE National BBO, and
NYSE National Trades. Thus, an NYSE BQT subscriber currently pays the
$250 access fee for NYSE BQT, plus a $1,500 access fee for each of NYSE
BBO and NYSE Trades,\17\ plus a $750 access fee for each of NYSE
American BBO and NYSE American Trades,\18\ plus a $750 access fee for
each of NYSE Arca BBO and NYSE Arca trades,\19\ for a total of $6,250
($250 + $3,000 + $1,500 + $1,500).\20\ In addition, an NYSE BQT
subscriber would need to pay for the applicable Professional or Non-
Professional User Fees for the underlying market data products, as
applicable.\21\
---------------------------------------------------------------------------
\16\ See NYSE Proprietary Market Data Fees, available here:
https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Fee_Schedule.pdf.
\17\ See id.
\18\ See Fee Schedule, available here: https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Equities_Market_Data_Fee_Schedule.pdf.
\19\ See NYSE Arca Equities Proprietary Market Data Fees,
available here: https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Equities_Fee_Schedule.pdf.
\20\ There are currently no fees charged for the NYSE Chicago
BBO, NYSE Chicago Trades, NYSE National BBO, or NYSE National Trades
market data products.
\21\ The Exchange is not proposing any changes to the User Fees.
Currently, the Professional User Fees for each of NYSE BBO and NYSE
Trades is $4 per month, and the Non-Professional User Fees for each
of NYSE BBO and NYSE Trades is $0.20 per month. See NYSE Proprietary
Market Data Fees, available here: https://www.nyse.com/publicdocs/nyse/data/NYSE_Market_Data_Fee_Schedule.pdf. The Professional User
Fees for each of NYSE American BBO and NYSE American Trades is $4
per month, and the Non-Professional User Fees for each of NYSE
American BBO and NYSE American Trades is $0.25 per month. See NYSE
American Price List, available here: https://www.nyse.com/publicdocs/nyse/data/NYSE_American_Equities_Market_Data_Fee_Schedule.pdf. The
Professional User Fees for each of NYSE Arca BBO and NYSE Arca
Trades is $4 per month, and the Non-Professional User Fees for each
of NYSE Arca BBO and NYSE Arca Trades is $0.25 per month. See NYSE
Arca Price List, available here: https://www.nyse.com/publicdocs/nyse/data/NYSE_Arca_Equities_Proprietary_Data_Fee_Schedule.pdf.
---------------------------------------------------------------------------
Because NYSE BQT is priced based on the fees associated with the
underlying ten market data feeds, the Exchange and its affiliates
propose to compete with the Nasdaq Basic and Cboe One Feed by reducing
fees for the underlying market data products that comprise NYSE BQT.
Together with NYSE and NYSE Arca, the Exchange similarly proposes to
compete for subscribers to NYSE BQT by designing its fee decreases to
be attractive to Redistributors that intend to subscribe to and
externally redistribute only NYSE BQT. The Exchange understands that
data recipients that are interested in subscribing to NYSE BQT obtain
their data from Redistributors that do not currently subscribe to
either the NYSE BQT data feed or any other market data product listed
on the Fee Schedule. Because such Redistributors do not subscribe to
NYSE BQT, the prospective data recipients that are the customers of
such Redistributors are unable to subscribe to NYSE BQT. The proposed
fee changes are designed to provide a financial incentive for such
Redistributors to subscribe to NYSE BQT so that their customers, which
have expressed an interest in subscribing to NYSE BQT, would be able to
access the product via such Redistributors.
Access Fee--NYSE American BBO and NYSE American Trades
NYSE American BBO is a NYSE American-only market data product that
allows a vendor to redistribute on a real-time basis the same best-bid-
and-offer information that NYSE American reports under the Consolidated
Quotation Plan (``CQ Plan'') for inclusion in the CQ Plan's
consolidated quotation information data stream (``NYSE American BBO
Information'').\22\ NYSE American BBO Information includes the best
bids and offers for all securities that are traded on the Exchange and
for which NYSE American reports quotes under the CQ Plan. NYSE American
BBO is available over a single data feed, regardless of the markets on
which the securities are listed. NYSE American BBO is made available to
its subscribers no earlier than the information it contains is made
available to the processor under the CQ Plan.
---------------------------------------------------------------------------
\22\ See Securities Exchange Act Release Nos. 61936 (April 16,
2010), 75 FR 21088 (April 22, 2010) (SR-NYSEAmex-2010-35) (notice--
NYSE American BBO); and 62187 (May 27, 2010), 75 FR 31500 (June 3,
2010) (SR-NYSEAmex-2010-35) (approval order--NYSE American BBO).
---------------------------------------------------------------------------
NYSE American Trades is a NYSE American-only market data product
that allows a vendor to redistribute on a real-time basis the same last
sale information that NYSE American reports to the Consolidated Tape
Association (``CTA'') for inclusion in the CTA's consolidated data
stream and certain other related data elements (``NYSE American Last
Sale Information'').\23\ NYSE American Last Sale Information includes
last sale information for all securities that are traded on the
Exchange. NYSE American Trades is made available to its subscribers at
the same time as the information it contains is made available to the
processor under the CTA Plan.
---------------------------------------------------------------------------
\23\ See Securities Exchange Act Release Nos. 61936 (April 16,
2010), 75 FR 21088 (April 22, 2010) (SR-NYSEAmex-2010-35) (notice--
NYSE American Trades); and 62187 (May 27, 2010), 75 FR 31500 (June
3, 2010) (SR-NYSEAmex-2010-35) (approval order--NYSE American
Trades).
---------------------------------------------------------------------------
Currently, subscribers of each of the NYSE American BBO and NYSE
American Trades products that receive a data feed pay an Access Fee of
$750 per month. In February 2020, the Exchange added the Per User
Access Fee, which is a reduced Access Fee of $100 per month currently
available only for subscribers of NYSE American BBO and NYSE American
Trades that receive those products in a display-only format, including
for internal use for Professional Users and external distribution to
both Professional and Non-Professional Users.\24\
---------------------------------------------------------------------------
\24\ A Per User Access Fee currently applies for subscribers of
NYSE American BBO and NYSE American Trades that receive a data feed
and use those market data products in a display-only format. See Fee
Schedule. See also Securities Exchange Act Release No. 87801
(December 19, 2019), 84 FR 71491 (December 27, 2019) (SR-NYSEAMER-
2019-55) (Notice of Filing and Immediate Effectiveness of Proposed
Rule Change, as Modified by Partial Amendment No. 1, To Amend the
Fees for NYSE American BBO and NYSE American Trades) (``BQT Fee
Reduction Filing'').
---------------------------------------------------------------------------
The Exchange now proposes that Redistributors of NYSE American BBO
and NYSE American Trades data feeds that do not subscribe to any other
market data product listed on the Fee Schedule, and use such market
data products for external distribution only, would also be eligible
for the reduced Per User Access Fee. A Redistributor that receives a
data feed of NYSE American BBO and NYSE American Trades and uses the
market data products for any other purpose (such as internal use) or
that subscribes to any other products listed on the Fee Schedule would
continue to pay the $1,500 per month General Access Fee. As currently
set forth in footnote 3 to the Fee Schedule, a subscriber would be
charged only one access fee for each of the NYSE American BBO and NYSE
American Trades products, depending on the use of that product.
To effect this change, the Exchange proposes to modify footnote 3
to the Fee
[[Page 73559]]
Schedule as follows (proposed text is italicized, proposed deletions
bracketed):
The Per User Access Fee is charged to: (i) [A] a subscriber that
receives a data feed and uses the market data product only for
Professional Users and Non-Professional Users in a display-only
format, including for internal use and external redistribution in a
display-only format, [will be charged the Per User Access Fee] and
(ii) a Redistributor that subscribes only to the NYSE American BBO
and NYSE American Trades data feeds, and does not subscribe to any
other Products listed on this Fee Schedule, and uses these market
data products for external distribution only. A subscriber that
receives a data feed and uses the market data product for any other
purpose, including if combined with Per User use, will be charged
the General Access Fee. A subscriber will be charged only one access
fee for each of the NYSE American BBO and NYSE American Trades
products, depending on the use of that product.
The proposed rule change would result in lower fees for
Redistributors of each of the NYSE American BBO and NYSE American
Trades products that receive NYSE American BBO and NYSE American Trades
data feeds and do not subscribe to any other market data product listed
on the Fee Schedule, and use such market data products for external
distribution only.\25\ The Exchange believes that the proposed fee
reduction in NYSE American BBO and NYSE American Trades would provide
an incentive for such Redistributors to subscribe to the NYSE BQT data
feeds so that such product would be available to their customers, which
have expressed an interest in subscribing to NYSE BQT.
---------------------------------------------------------------------------
\25\ The Per User Access Fee is 93% lower than the General
Access Fee. Together with the corresponding proposed rule changes by
NYSE and NYSE Arca to similarly reduce the access fees to their BBO
and Trades products for Redistributors, such Redistributors would be
eligible for significantly lower access fees for NYSE BQT, from
$6,250 per month to $850 per month ($250 + $200 + $200 +$200), a
reduction of more than 86%.
---------------------------------------------------------------------------
The proposed rule change is intended to encourage greater use of
NYSE BQT by making it more affordable for Redistributors that have
customers interested in subscribing to NYSE BQT but that do not
currently subscribe to NYSE American BBO or NYSE American Trades or any
other products listed on the Fee Schedule. The proposed fee reduction
would allow the Exchange to compete more effectively with Nasdaq Basic
and Cboe One Feed by expanding the number of Redistributors that would
subscribe to NYSE BQT, and therefore make the product available to data
subscribers interested in NYSE BQT.
Redistribution Fee--NYSE American Trades
The Exchange currently charges a Redistribution Fee of $750 per
month for NYSE American Trades. A Redistributor is required to report
to the Exchange each month the number of Professional and Non-
Professional Users and data feed recipients that receive NYSE American
Trades.
The Exchange proposes to waive the Redistribution Fee for a
Redistributor that is eligible for the Per User Access Fee if the
Redistributor provides NYSE American Trades externally to at least one
data feed recipient and reports such data feed recipient or recipients
to the Exchange. For example, a Redistributor that subscribes to the
NYSE American BBO and NYSE American Trades data feeds and does not
subscribe to any other product listed on the Fee Schedule would have
the Redistribution Fee waived for the month if such Redistributor
provides NYSE American BBO and NYSE American Trades externally to at
least one data feed recipient and reports such data feed recipient to
the Exchange.
By targeting this proposed fee waiver to Redistributors that
provide external distribution of NYSE American Trades, the Exchange
believes that this would provide an incentive for Redistributors to
make the NYSE BQT market data product available to its customers.
Specifically, if a data recipient is interested in subscribing to NYSE
BQT and relies on a Redistributor to obtain market data products from
the Exchange, that data recipient would need its Redistributor to
redistribute NYSE BQT. Currently, Redistributors that redistribute some
NYSE American market data products do not necessarily also make NYSE
BQT available. The Exchange believes that this proposed fee waiver for
Redistributors of NYSE American Trades would provide an incentive for
Redistributors to make NYSE BQT available to their customers, which
will increase the availability of NYSE BQT to a larger potential
population of data recipients.\26\
---------------------------------------------------------------------------
\26\ NYSE American does not charge a Redistribution Fee for NYSE
American BBO.
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Applicability of Proposed Rule Change
As noted above, the proposed rule change is designed to further
reduce the overall cost of NYSE BQT by reducing specified fees
applicable to the underlying market data products that comprise NYSE
BQT. Prior to the BQT Fee Reduction Filing, the Exchange had only one
subscriber to NYSE BQT. Today, the Exchange has seven subscribers,
three of whom became customers as a direct result of the BQT Fee
Reduction Filing and currently pay the reduced Per User Access Fee. The
Exchange believes that the proposed rule changes would provide a
further incentive for Redistributors to subscribe to NYSE BQT for
purposes of providing external distribution of NYSE BQT to potential
data recipients interested in the product.
Because the proposed rule change is targeted to potential
Redistributors of NYSE BQT that do not currently subscribe to any NYSE
market data products, the proposed changes to the availability of the
NYSE American BBO and NYSE American Trades Per User Access Fees,
together with the proposed changes on NYSE and NYSE Arca, are narrowly
tailored with that purpose in mind. Accordingly, these proposed fee
changes are not designed for Redistributors that are existing customers
of NYSE American market data products or that engage in internal use of
NYSE BQT. This proposed rule change would not result in any changes to
the market data fees for NYSE American BBO and NYSE American Trades for
such data subscribers.
The Exchange believes that there are at least three potential
Redistributors that would meet the qualifications to be eligible for
these proposed fee changes. The Exchange further believes that this
proposed rule change has the potential to attract these three
Redistributors as new Redistributors for NYSE BQT, as well as new NYSE
BQT subscribers that would be subscribing to NYSE American BBO and NYSE
American Trades for the first time.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6 of the Act,\27\ in general, and
Sections 6(b)(4) and 6(b)(5) of the Act,\28\ in particular, in that it
provides an equitable allocation of reasonable fees among users and
recipients of the data and is not designed to permit unfair
discrimination among customers, issuers, and brokers.
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\27\ 15 U.S.C. 78f(b).
\28\ 15 U.S.C. 78f(b)(4), (5).
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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
[[Page 73560]]
prices, products, and services in the securities markets. Specifically,
in Regulation NMS, the Commission highlighted the importance of market
forces in determining prices and SRO revenues, and also recognized that
current regulation of the market system ``has been remarkably
successful in promoting market competition in its broader forms that
are most important to investors and listed companies.'' \29\
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\29\ See Regulation NMS Adopting Release, 70 FR 37495, at 37499.
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With respect to market data, the decision of the United States
Court of Appeals for the District of Columbia Circuit in NetCoalition
v. SEC upheld the Commission's reliance on the existence of competitive
market mechanisms to evaluate the reasonableness and fairness of fees
for proprietary market data:
In fact, the legislative history indicates that the Congress
intended that the market system ``evolve through the interplay of
competitive forces as unnecessary regulatory restrictions are
removed'' and that the SEC wield its regulatory power ``in those
situations where competition may not be sufficient,'' such as in the
creation of a ``consolidated transactional reporting system.'' \30\
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\30\ NetCoalition v. SEC, 615 F.3d 525, 535 (D.C. Cir. 2010)
(``NetCoalition I'') (quoting H.R. Rep. No. 94-229 at 92 (1975), as
reprinted in 1975 U.S.C.C.A.N. 323).
The court agreed with the Commission's conclusion that ``Congress
intended that `competitive forces should dictate the services and
practices that constitute the U.S. national market system for trading
equity securities.' '' \31\
---------------------------------------------------------------------------
\31\ Id. at 535.
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More recently, the Commission confirmed that it applies a ``market-
based'' test in its assessment of market data fees, and that under that
test:
the Commission considers whether the exchange was subject to
significant competitive forces in setting the terms of its proposal
for [market data], including the level of any fees. If an exchange
meets this burden, the Commission will find that its fee rule is
consistent with the Act unless there is a substantial countervailing
basis to find that the terms of the rule violate the Act or the
rules thereunder.\32\
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\32\ See Securities Exchange Act Release No. 34-90217 (October
16, 2020), 85 FR 67392 (October 22, 2020) (SR-NYSENAT-2020-05)
(``National IF Approval Order'') (internal quotation marks omitted),
quoting Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770, 74781 (December 9, 2008) (``2008 ArcaBook
Approval Order'').
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1. The Proposed Fees Are Constrained by Significant Competitive Forces
a. Exchange Market Data Is Sold in a Competitive Market
In 2018, Charles M. Jones, the Robert W. Lear of Professor of
Finance and Economics of the Columbia University School of Business,
conducted an analysis of the market for equity market data in the
United States. He canvassed the demand for both consolidated and
exchange proprietary market data products and the uses to which those
products were put by market participants, and reported his conclusions
in a paper annexed hereto.\33\ Among other things, Professor Jones
concluded that:
---------------------------------------------------------------------------
\33\ 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 by offering their proprietary market data
products for free for some period of time.'' \34\
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\34\ Jones Paper at 2.
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``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.'' \35\
---------------------------------------------------------------------------
\35\ Id.
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``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.'' \36\
---------------------------------------------------------------------------
\36\ 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.'' \37\
---------------------------------------------------------------------------
\37\ Id.
---------------------------------------------------------------------------
``For proprietary exchange data feeds, the main question
is whether there is a competitive market for proprietary market data.
More than 40 active exchanges and alternative trading systems compete
vigorously in both the market for order flow and in the market for
market data. The two are closely linked: an exchange needs to consider
the negative impact on its order flow if it raises the price of its
market data. Furthermore, new entrants have been frequent over the past
10 years or so, and these venues often give market data away for free,
serving as a check on pricing by more established exchanges. These are
all the standard hallmarks of a competitive market.'' \38\
---------------------------------------------------------------------------
\38\ 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.\39\
---------------------------------------------------------------------------
\39\ More recently, Professors Jonathan Brogaard and James
Brugler also looked at the market for proprietary market data
products and confirmed that it is competitive. The authors document
that introducing fees for market data leads to lower market share,
and identify informed traders as the most affected trader categories
after fees are introduced. See Jonathan Brogaard and James Brugler,
Competition and Exchange Data Fees, October 2, 2020 (Exhibit 3B).
---------------------------------------------------------------------------
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 platform competition applies.
As the United States Supreme Court recognized in Ohio v. American
Express, platforms are firms that act as intermediaries between two or
more sets of agents, and typically the choices made on one side of the
platform affect the results on the other side of the platform via
externalities, or ``indirect network effects.'' \40\ Externalities are
linkages between the different ``sides'' of a platform such that one
cannot understand pricing and competition for goods or services on one
side of the platform in isolation; one must also account for the
influence of the other side. As the Supreme Court explained:
---------------------------------------------------------------------------
\40\ 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
[[Page 73561]]
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.\41\
---------------------------------------------------------------------------
\41\ Id. at 2281.
The Exchange and its affiliated exchanges have long maintained that
they function as platforms between consumers of market data and
consumers of trading services. Proving the existence of linkages
between the two sides of this platform requires an in-depth economic
analysis of both public data and confidential Exchange data about
particular customers' trading activities and market data purchases.
Exchanges, however, are prohibited from sharing details about these
specific customer activities and purchases. For example, pursuant to
Exchange Rule 7.41E, transactions executed on the Exchange are
processed anonymously.
The Exchange and its affiliated exchanges retained a third party
expert, Marc Rysman, Professor of Economics Boston University, to
analyze how platform economics applies to stock exchanges' sale of
market data products and trading services, and to explain how this
affects the assessment of competitive forces affecting the exchanges'
data fees.\42\ Professor Rysman was able to analyze exchange data that
is not otherwise publicly available in a manner that is consistent with
the exchanges' confidentiality obligations to customers. As shown in
his paper, Professor Rysman surveyed the existing economic literature
analyzing stock exchanges as platforms between market data and trading
activities, and explained the types of linkages between market data
access and trading activities that must be present for an exchange to
function as a platform. In addition, Professor Rysman undertook an
empirical analysis of customers' trading activities within the NYSE
group of exchanges in reaction to NYSE's introduction in 2015 of the
NYSE Integrated Feed, a full order-by-order depth of book data
product.\43\
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\42\ See Exhibit 3C, Marc Rysman, Stock Exchanges as Platforms
for Data and Trading, December 2, 2019 (hereinafter ``Rysman
Paper''), ] 7.
\43\ 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.\44\ 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.\45\ This is the sort of
externality that is a key characteristic of a platform market.\46\
---------------------------------------------------------------------------
\44\ Rysman Paper ]] 79-89.
\45\ Id. ]] 90-91.
\46\ Id. ] 90.
---------------------------------------------------------------------------
From this empirical evidence, Professor Rysman concludes:
``[D]ata is more valuable when it reflects more trading
activity and more liquidity-providing orders. These linkages alone are
enough to make platform economics necessary for understanding the
pricing of market data.'' \47\
---------------------------------------------------------------------------
\47\ 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.'' \48\
---------------------------------------------------------------------------
\48\ 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.''
\49\
---------------------------------------------------------------------------
\49\ Id.
---------------------------------------------------------------------------
``[E]mpirical evidence confirms that stock exchanges are
platforms for data and trading.'' \50\
---------------------------------------------------------------------------
\50\ 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.'' \51\
---------------------------------------------------------------------------
\51\ Id. ] 98.
---------------------------------------------------------------------------
``Competition is properly understood as being between
platforms (i.e., stock exchanges) that balance the needs of consumers
of data and traders.'' \52\
---------------------------------------------------------------------------
\52\ Id.
---------------------------------------------------------------------------
``Data fees, data use, trading fees, and order flow are
all interrelated.'' \53\
---------------------------------------------------------------------------
\53\ Id.
---------------------------------------------------------------------------
``Competition for order flow can discipline the pricing of
market data, and vice-versa.'' \54\
---------------------------------------------------------------------------
\54\ Id.
---------------------------------------------------------------------------
``As with platforms generally, overall competition between
exchanges will limit their overall profitability, not margins on any
particular side of the platform.'' \55\
---------------------------------------------------------------------------
\55\ Id. ] 100.
---------------------------------------------------------------------------
c. Exchange Market Data Fees Are Constrained by the Availability of
Substitute Platforms
Professor Rysman's conclusions that exchanges function as platforms
for market data and transaction services mean that exchanges do not set
fees for market data products without considering, and being
constrained by, the effect the fees will have on the order-flow side of
the platform. And as the D.C. Circuit recognized in NetCoalition I,
``[n]o one disputes that competition for order flow is fierce.'' \56\
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.'' \57\
---------------------------------------------------------------------------
\56\ NetCoalition I, 615 F.3d at 544 (internal quotation
omitted).
\57\ Id.
---------------------------------------------------------------------------
As noted above, while Regulation NMS has enhanced competition, it
has also fostered a ``fragmented'' market structure where trading in a
single stock can occur across multiple trading centers. When multiple
trading centers compete for order flow in the same stock, the
Commission has recognized that ``such competition can lead to the
fragmentation of order flow in that stock.'' \58\ 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.'' \59\ Indeed,
[[Page 73562]]
today, equity trading is currently dispersed across 16 exchanges,\60\
numerous alternative trading systems,\61\ broker-dealer internalizers
and wholesalers, all competing for order flow. Based on publicly-
available information, no single exchange currently has more than 18%
market share.\62\
---------------------------------------------------------------------------
\58\ See Securities Exchange Act Release No. 61358, 75 3594,
3597 (January 21, 2010) (File No. S7-02-10) (Concept Release on
Equity Market Structure).
\59\ 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.
\60\ 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.
\61\ 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.
\62\ 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, and do,
rapidly and inexpensively enter the market and offer additional
substitute platforms to compete with the Exchange.\63\ For example, in
2020 alone, three new exchanges have entered the market: Long Term
Stock Exchange (LTSE), which began operations as an exchange on August
28, 2020; \64\ Members Exchange (MEMX), which began operations as an
exchange on September 29, 2020; \65\ and Miami International Holdings
(MIAX), which began operations of its first equities exchange on
September 29, 2020.\66\
---------------------------------------------------------------------------
\63\ See Jones Paper at 10-11.
\64\ See LTSE Market Announcement: MA-2020-020, dated August 14,
2020, announcing LTSE production securities phase-in planned for
August 28, available here: https://assets.ctfassets.net/cchj2z2dcfyd/rnGvgggJUplaIk6N1xNA7/41926d3925a177d6455868090c46aeda/MA-2020-020__Production_Securities_Launching_August_28_-_Google_Docs.pdf and LTSE Market Announcement: MA-2020-025,
available here: https://assets.ctfassets.net/cchj2z2dcfyd/52nIKwAuOraU1agaNY5j80/0d27ab0eb9b540c67a5e9f831f23f0ac/MA-2020-025.pdf.
\65\ As of October 29, 2020, MEMX is trading all NMS symbols but
has not yet enabled NMS routing. See https://info.memxtrading.com/trader-alert-20-10-memx-trading-symbols-update/.
\66\ See MIAX Pearl Press release, dated September 29, 2020,
available here: https://www.miaxoptions.com/sites/default/files/alert-files/MIAX_Press_Release_09292020.pdf.
---------------------------------------------------------------------------
These low barriers enable existing exchange customers to
disintermediate and start their own exchanges if they think the prices
charged for exchange proprietary market data products are too high.
This is precisely the rationale behind the creation of MEMX, which was
formed by some of the largest and most well capitalized financial firms
that are also Exchange customers (including Bank of America, BlackRock,
Charles Schwab, Citadel, Citi, E*Trade, Fidelity, Goldman Sachs, J.P.
Morgan, Jane Street, Morgan Stanley, TD Ameritrade, and others).\67\
---------------------------------------------------------------------------
\67\ MEMX Home Page (``Founded by members and investors, MEMX
aims to drive simplicity, efficiency, and competition in equity
markets.''), available at https://memx.com/.
---------------------------------------------------------------------------
For example, one of MEMX's founding principles is that exchange
proprietary market data prices are too high, and that MEMX will benefit
its members by offering ``[l]ower pricing on market data.'' \68\ Nor is
this a new phenomenon: Exchange customers formed BATS to compete with
incumbent exchanges and once registered as an exchange in 2008, BATS
did not initially charge for market data. The BATS venture was a
financial success for its founders, first through recouping their
investment in its initial public offering and then in the subsequent
sale of BATS to Cboe, which now charges for market data from those
exchanges. Notably, MEMX has some of the same founding broker-dealer
customers, leading some to dub MEMX ``BATS 2.0.'' \69\
---------------------------------------------------------------------------
\68\ MEMX home page, available at https://memx.com/.
\69\ See ``MEMX turns up the heat on US stock exchanges,''
Financial Times, January 9, 2019, available at https://www.ft.com/content/4908c8b0-1418-11e9-a581-4ff78404524e; see also ``US equities
exchanges: If you can't beat them, join them,'' Euromoney, February
13, 2019, available at https://www.euromoney.com/article/b1d3tfby4p3y4v/us-equities-exchanges-if-you-cant-beat-them-join-them.
---------------------------------------------------------------------------
The fact that this cycle is viable and repeatable by entities that
both trade on and compete with existing exchanges confirms that
barriers to entry are low and that these markets are competitive and
contestable.\70\ And low barriers to entry act as a market check on
high prices.\71\
---------------------------------------------------------------------------
\70\ United States v. SunGard Data Sys., 172 F. Supp. 2d 172,
186 (D.D.C. 2001) (recognizing that ``[a]s a matter of law, courts
have generally recognized that when a customer can replace the
services of an external product with an internally-created system,
this captive output (i.e., the self-production of all or part of the
relevant product) should be included in the same market.''). In
SunGard, the court rejected the Antitrust Division's attempt to
block SunGuard's acquisition of the disaster recovery assets of
Comdisco on the basis that the acquisition would ``substantially
lessen competition in the market for shared hotsite disaster
recovery services,'' when the evidence showed that ``internal
hotsites'' created by customers competed with the ``external shared
hotsite business'' engaged in by the merging parties. Id. at 173-74,
187.
\71\ United States v. Baker Hughes, 908 F.2d 981, 987 (1990)
(``In the absence of significant barriers [to entry], a company
probably cannot maintain supracompetitive pricing for any length of
time.''); see also David S. Evans and Richard Schmalensee, Markets
with Two-Sided Platforms, in 1 Issues In Competition Law And Policy
667, 685 (ABA Section of Antitrust Law 2008) (noting that exchange
mergers in 2005 and 2006 were approved by competition authorities in
part in reliance on planned and likely entry of other firms).
---------------------------------------------------------------------------
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.\72\ 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.\73\ 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.\74\
---------------------------------------------------------------------------
\72\ Rysman Paper ] 98.
\73\ See Jones Paper at 11.
\74\ In the context of the fee proposal that led to the National
IF Approval Order, supra note 33, one commenter contended that
trading was not a platform with exchange proprietary market data,
and that the exchanges' proprietary market data products were
instead ``complements'' for which exchanges could charge
supracompetitive prices. Professor Rysman debunked these contentions
in an additional paper. See Marc Rysman, Complements, Competition,
and Exchange Proprietary Data Products, August 13, 2020 (Exhibit
3D).
---------------------------------------------------------------------------
In sum, the fierce competition for order flow thus constrains any
exchange from pricing its market data at a supracompetitive price, and
constrains the Exchange in setting its fees at issue here.
The proposed fees are therefore reasonable because in setting them,
the Exchange is constrained by the availability of numerous substitute
platforms offering market data products and trading. Such substitutes
need not be identical, but only substantially similar to the product at
hand.
More specifically, in reducing specified fees for the NYSE American
BBO and NYSE American Trades market data products, 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
[[Page 73563]]
order to establish reasonable fees. The existence of numerous
alternative platforms to the Exchange's platform ensures that the
Exchange cannot set unreasonable market data fees without suffering the
negative effects of that decision in the fiercely competitive market
for trading order flow.
d. The Availability of Substitute Market Data Products Constrains Fees
for NYSE American BBO, NYSE American Trades, and NYSE BQT
Even putting aside the facts that exchanges are platforms and that
pricing decisions on the two sides of the platform are intertwined, the
Exchange is constrained in setting the proposed market data fees by the
availability of numerous substitute market data products. The
Commission has been clear that substitute products need not be
identical, but only substantially similar to the product at hand.\75\
---------------------------------------------------------------------------
\75\ For example, in the National IF Approval Order, the
Commission recognized that for some customers, the best bid and
offer information from consolidated data feeds may function as a
substitute for the NYSE National Integrated Feed product, which
contains order by order information. See National IF Approval Order,
supra note 33, at 67397 [release p. 21] (``[I]nformation provided by
NYSE National demonstrates that a number of executing broker-dealers
do not subscribe to the NYSE National Integrated Feed and executing
broker-dealers can otherwise obtain NYSE National best bid and offer
information from the consolidated data feeds.'' (internal quotations
omitted)).
---------------------------------------------------------------------------
The NYSE BQT market data product is subject to significant
competitive forces that constrain its pricing. Specifically, as
described above, NYSE BQT competes head-to-head with the Nasdaq Basic
product and the Cboe One Feed. These products each serve as reasonable
substitutes for one another as they are each designed to provide
investors with a unified view of real-time quotes and last-sale prices
in all Tape A, B, and C securities. Each product provides subscribers
with consolidated top-of-book quotes and trades from multiple U.S.
equities markets. In the case of NYSE BQT, this product provides top-
of-book quotes and trades data from five NYSE-affiliated U.S. equities
exchanges, which together account for approximately 22% of consolidated
U.S. equities trading volume as of September 2020.\76\ Cboe One Feed
similarly provides top-of-book quotes and trades data from Cboe's four
U.S. equities exchanges. NYSE BQT, Nasdaq Basic, and Cboe One Feed are
all intended to provide indicative pricing and are not intended to be
used for order routing or trading decisions.
---------------------------------------------------------------------------
\76\ See Cboe Global Markets U.S. Equities Market Volume
Summary, available at https://markets.cboe.com/us/equities/market_share/market/2019-10-31/.
---------------------------------------------------------------------------
In addition to competing with proprietary data products from Nasdaq
and Cboe, NYSE BQT also competes with the consolidated data feed.
However, the Exchange does not claim that NYSE BQT is a substitute for
consolidated data with respect to requirements under the Vendor Display
Rule, which is Regulation NMS Rule 603(c).
The fact that this filing is proposing reductions in certain fees
and fee waivers is itself confirmation of the inherently competitive
nature of the market for the sale of proprietary market data. For
example, in August 2019, Cboe filed proposed rule changes to reduce
certain of its Cboe One Feed fees and noted that it attracted two
additional customers because of the reduced fees.\77\ More recently,
Nasdaq filed a proposed rule change to lower the enterprise license fee
for broker-dealers distributing Nasdaq Basic to internal Professional
subscribers and the enterprise license fee for broker-dealers
distributing Nasdaq Last Sale to Professional subscribers.\78\
---------------------------------------------------------------------------
\77\ See Securities Exchange Act Release Nos. 86667 (August 14,
2019) (SR-CboeBZX-2019-069); 86670 (August 14, 2019) (SR-CboeBYX-
2019-012); 86676 (August 14, 2019) (SR-CboeEDGA-2019-013); and 86678
(August 14, 2019) (SR-CboeEDGX-2019-048) (Notices of filing and
Immediate effectiveness of proposed rule change to reduce fees for
the Cboe One Feed) (collectively ``Cboe One Fee Filings''). The Cboe
One Fee Filings were in effect from August 1, 2019 until September
30, 2019, when the Commission suspended them and instituted
proceedings to determine whether to approve or disapprove those
proposals. See, e.g., Securities Exchange Act Release No. 87164
(September 30, 2019), 84 FR 53208 (October 4, 2019) (SR-CboeBZX-
2019-069). On October 1, 2019, the Cboe equities exchanges refiled
the Cboe One Fee Filings on the basis that they had new customers
subscribe as a result of the Cboe One Fee Filings, and therefore its
fee proposal had increased competition for top-of-book market data.
See Securities Exchange Act Release Nos. 87312 (October 15, 2019),
84 FR 56235 (October 21, 2019) (SR-CboeBZX-2019-086); 87305 (October
14, 2019), 84 FR 56210 (October 21, 2019) (SR-CboeBYX-2019-015);
87295 (October 11, 2019), 84 FR 55624 (October 17, 2019) (SR-
CboeEDGX-2019-059); and 87294 (October 11, 2019), 84 FR 55638
(October 17, 2019) (SR-CboeEDGA-2019-015) (Notices of filing and
immediate effectiveness of proposed rule changes to re-file the
Small Retail Broker Distribution Program) (``Cboe One Fee Re-
Filings''). On November 26, 2019, the Commission suspended the Cboe
One Fee Re-Filings and instituted proceedings to determine whether
to approve or disapprove those proposals. See, e.g., Securities
Exchange Act Release No. 87629 (November 26, 2019), 84 FR 66245
(December 3, 2019) (SR-CboeBZX-2019-086). On November 27, 2019, the
Cboe equities exchanges refiled the Cboe One Fee Filings with one
revision to the requirements for participating in the Small Retail
Broker Distribution Program and additional information about the
basis for the proposed fee changes. See Securities Exchange Act
Release Nos. 87712 (December 10, 2019), 84 FR 68508 (December 16,
2019) (SR-CboeBZX-2019-101); 88713 (December 10, 2019), 84 FR 68530
(December 16, 2019) (SR-CboeBYX-2019-023); 87709 (December 10,
2019), 84 FR 68523 (December 16, 2019) (SR-CboeEDGA-2019-021); and
87711 (December 10, 2019), 84 FR 68501 (December 16, 2019) (SR-Cboe-
EDGX-2019-071) (Notices of filing and immediate effectiveness of
proposed rule changes to introduce a Small Retail Broker
Distribution Program) (``Cboe One Third Fee Re-Filings''). On
February 4, 2020, the Cboe equities exchanges withdrew the Cboe One
Third Fee Re-Filings and, on the same date, refiled the Cboe One Fee
Filings. See Securities Exchange Act Release Nos. 88221 (February
14, 2020), 85 FR 9904 (February 20, 2020) (SR-CboeBYX-2020-007);
88218 (February 14, 2020), 85 FR 9827 (February 20, 2020) (SR-
CboeBZX-2020-014); 88220 (February 14, 2020), 85 FR 9912 (February
20, 2020) (SR-CboeEDGA-2020-004); and 88219 (February 14, 2020), 85
FR 9872 (February 20, 2020) (SR-CboeEDGX-2020-008) (Notices of
filing and immediate effectiveness of proposed rule changes to
introduce a Small Retail Broker Distribution Program) (``Cboe One
Fourth Fee Re-Filings''). On April 15, 2020, the Cboe equities
exchanges withdrew the Cboe One Fee Filings and the Cboe One Fee Re-
Filings. Pursuant to the Cboe One Fourth Fee Re-Filings, the Small
Retail Broker Distribution Program is currently in effect at the
Cboe equities exchanges.
\78\ See Securities Exchange Act Release No. 90177 (October 14,
2020), 85 FR 66620 (October 20, 2020) (SR-NASDAQ-2020-065) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To
Lower the Enterprise License Fee for Broker-Dealers Distributing
Nasdaq Basic to Internal Professional Subscribers as Set Forth in
the Equity 7 Pricing Schedule, Section 147, and the Enterprise
License Fee for Broker-Dealers Distributing Nasdaq Last Sale to
Professional Subscribers at Equity 7, Section 139).
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The Exchange notes that NYSE American BBO, NYSE American Trades,
and NYSE BQT are entirely optional. The Exchange is not required to
make the proprietary data products that are the subject of this
proposed rule change available or to offer any specific pricing
alternatives to any customers, nor is any firm or investor required to
purchase the Exchange's data products. Unlike some other data products
(e.g., the consolidated quotation and last-sale information feeds) that
firms are required to purchase in order to fulfil regulatory
obligations,\79\ a customer's decision whether to purchase any of the
Exchange's proprietary market data feeds is entirely discretionary.
Most firms that choose to subscribe to proprietary market data feeds
from the Exchange and its affiliates do so for the primary goals of
using them to increase their revenues, reduce their expenses, and in
some instances compete directly with the Exchange's trading services.
Such firms are able to determine for
[[Page 73564]]
themselves whether or not the products in question or any other similar
products are attractively priced. If market data feeds from the
Exchange and its affiliates do not provide sufficient value to firms
based on the uses those firms may have for it, such firms may simply
choose to conduct their business operations in ways that do not use the
products.\80\
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\79\ 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.
\80\ See generally Jones Paper at 8, 10-11.
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In addition, in the case of products that are also redistributed
through market data vendors, such as Bloomberg and Refinitiv, the
vendors themselves provide additional price discipline for proprietary
data products because they control the primary means of access to
certain end users. These vendors impose price discipline based upon
their business models. For example, vendors that assess a surcharge on
data they sell are able to refuse to offer proprietary products that
their end users do not or will not purchase in sufficient numbers. This
competitive constraint is precisely what is driving the proposed fee
changes here, which are designed to attract new market data vendors,
and through them new subscribers, to the NYSE BQT product. Currently,
only four vendors subscribe to NYSE BQT, and each vendor has limited
redistribution of NYSE BQT. No other vendors currently subscribe to
NYSE BQT and likely will not unless their customers request it, and
customers will not elect to pay the proposed fees unless such product
can provide value by sufficiently increasing revenues or reducing costs
in the customer's business in a manner that will offset the fees. All
of these factors operate as constraints on pricing proprietary data
products.
Because of the availability of substitutes, an exchange that
overprices its market data products stands a high risk that users may
substitute another source of market data information for its own. Those
competitive pressures imposed by available alternatives are evident in
the Exchange's proposed pricing.
In setting the proposed fees, the Exchange considered the
competitiveness of the market for proprietary data and all of the
implications of that competition. The Exchange believes that it has
considered all relevant factors and has not considered irrelevant
factors in order to establish reasonable fees. The existence of
numerous alternatives to the Exchange's platform and, more
specifically, alternatives to the market data products, including
proprietary data from other sources, ensures that the Exchange cannot
set unreasonable fees when vendors and subscribers can elect these
alternatives or choose not to purchase a specific proprietary data
product if the attendant fees are not justified by the returns that any
particular vendor or data recipient would achieve through the purchase.
2. The Proposed Fees Are Reasonable
The specific fees that the Exchange proposes for NYSE American BBO
and NYSE American Trades are reasonable, for the following additional
reasons.
Overall. This proposed fee change is a result of the competitive
environment, as the Exchange seeks to decrease certain of its fees to
attract Redistributors that do not currently subscribe to the NYSE BQT
market data product. The Exchange is proposing the fee reductions at
issue to make the Exchange's fees more competitive for a specific
segment of market participants, thereby increasing the availability of
the Exchange's data products, and expanding the options available to
firms making data purchasing decisions based on their business needs.
The Exchange believes that this is consistent with the principles
contained in Regulation NMS to ``promote the wide availability of
market data and to allocate revenues to SROs that produce the most
useful data for investors.'' \81\
---------------------------------------------------------------------------
\81\ See Regulation NMS Adopting Release, 70 FR 37495, at 37503.
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Access Fee. By making the reduced Per User Access Fee available to
Redistributors that subscribe only to the NYSE American BBO and NYSE
American Trades data feeds and NYSE BQT and do not have any internal
use of such products, and do not subscribe to any other products listed
on the Fee Schedule, the Exchange believes that more Redistributors may
choose to subscribe to these products, thereby expanding the
distribution of this market data for the benefit of investors that
participate in the national market system and increasing competition
generally. The Exchange also believes that offering the Per User Access
Fee to these Redistributors would expand the availability of NYSE BQT
to potential data recipients that are interested in subscribing to NYSE
BQT but do not have access to a Redistributor who subscribes to the
data feeds.
The Exchange determined to make the reduced Per User Access Fee
available to these Redistributors because it constitutes a substantial
reduction of the current fee, with the intended purpose of increasing
use of NYSE BQT by Redistributors that do not currently subscribe to
any NYSE American market data products. NYSE BQT has been in place
since 2014 but has a very small number of subscribers. The Exchange
believes that in order to compete with other indicative pricing
products such as Nasdaq Basic and Cboe One Feed, it needs to provide a
meaningful financial incentive for more Redistributors to choose to
subscribe to NYSE BQT so that they can make it available to their
customers. Accordingly, the proposed reduction to the access fees for
NYSE American BBO and NYSE American Trades, together with the proposed
reduction to the access fees for NYSE BBO, NYSE Trades, NYSE Arca BBO,
and NYSE Arca Trades, is reasonable because the reductions will make
NYSE BQT a more attractive offering for Redistributors that do not
currently subscribe to any NYSE American market data products and make
it more competitive with Nasdaq Basic and Cboe One Feed. For example,
the External Distribution Fee for Cboe One Feed is currently $5,000
(which is the sum of the External Distribution fees for the four
exchange data products that are included in Cboe One Feed) plus a Data
Consolidation Fee of $1,000, for a total of $6,000. Evidence of the
competition among exchange groups for these products has previously
been demonstrated via fee changes. For example, following the
introduction of the Cboe One Feed, Nasdaq responded by reducing its
fees for the Nasdaq Basic product.\82\ With the proposed changes by the
Exchange, NYSE, and NYSE Arca, the Exchange is similarly seeking to
compete by decreasing the total access fees for NYSE BQT from $6,250 to
$850 for Redistributors that do not currently subscribe to any NYSE
American market data products and have customers that are interested in
subscribing to NYSE BQT but cannot do so until their Redistributor also
subscribes. This proposed rule change therefore demonstrates the
existence of an effective, competitive market because this proposal
resulted from a need to generate innovative approaches in response to
competition from other exchanges that offer market data for a specific
segment of market participants.
---------------------------------------------------------------------------
\82\ See e.g., Securities Exchange Act Release No. 83751 (July
31, 2018), 83 FR 38428 (August 6, 2018) (SR-NASDAQ-2018-058) (Notice
of Filing and Immediate Effectiveness of Proposed Rule Change To
Lower Fees and Administrative Costs for Distributors of Nasdaq
Basic, Nasdaq Last Sale, NLS Plus and the Nasdaq Depth-of-Book
Products Through a Consolidated Enterprise License). Nasdaq filed
the proposed fee change to lower the Enterprise Fee for Nasdaq Basic
and other market data products in response to the Enterprise Fee for
the Cboe One Feed adopted by Cboe family of exchanges.
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[[Page 73565]]
Redistribution Fees. Similarly, the proposed waiver of the NYSE
American Trades Redistribution Fee is reasonable because it is designed
to provide an incentive for Redistributors to make NYSE BQT available
so that data recipients can subscribe to NYSE BQT. The Exchange further
believes that the proposed waiver of the NYSE American Trades
Redistribution Fee is reasonable because it is designed to compete with
market data products offered by the Cboe family of equity
exchanges.\83\
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\83\ See, e.g., BZX Price List--U.S. Equities available at
https://www.nasdaqtrader.com/Trader.aspx?id=DPUSdata#db. BZX charges
$500 per month for internal distribution, and $2,500 per month for
external distribution, of BZX Last Sale. BZX also charges $500 per
month for internal distribution, and $2,500 per month for external
distribution, of BZX Top. See Cboe BZX U.S. Equities Exchange Fee
Schedule at https://markets.cboe.com/us/equities/membership/fee_schedule/bzx/.
---------------------------------------------------------------------------
For all of the foregoing reasons, the Exchange believes that the
proposed fees are reasonable.
The Proposed Fees Are Equitably Allocated
The Exchange believes the proposed fees for NYSE American BBO and
NYSE American Trades are allocated fairly and equitably among the
various categories of users of the feed, and any differences among
categories of users are justified.
Overall. As noted above, this proposed fee change is a result of
the competitive environment for market data products that provide
indicative pricing information across a family of exchanges. To respond
to this competitive environment, the Exchange seeks to amend its fees
to access NYSE American BBO and NYSE American Trades for Redistributors
that would be subscribing only to the NYSE American BBO and NYSE
American Trades data feeds and would use these market data products for
external distribution only, which the Exchange hopes will attract new
Redistributor subscribers for the NYSE BQT market data product so that
the product can be made available to prospective market data
recipients. The Exchange is proposing the fee reductions to make the
Exchange's fees more competitive for a specific segment of market
participants, thereby increasing the availability of the Exchange's
data products, expanding the options available to firms making data
purchasing decisions based on their business needs, and generally
increasing competition.
Access Fee. The Exchange believes that making the Per User Access
Fee available to Redistributors that would be subscribing only to the
NYSE American BBO and NYSE American Trades data feeds and would use
these market data products for external distribution only is equitable
as it would apply equally to all data recipients that choose to
subscribe to NYSE American BBO or NYSE American Trades for external
distribution only and who do not subscribe to any other products listed
on the Fee Schedule. Because NYSE American BBO and NYSE American Trades
are optional products, any data recipient could choose to subscribe
only to NYSE American BBO or NYSE American Trades to distribute
externally and be eligible for the proposed reduced fee. The Exchange
does not believe that it is inequitable that this proposed fee
reduction would be available only to data recipients that subscribe
only to NYSE American BBO or NYSE American Trades and only for external
distribution. Internal use of data represents a different set of use
cases than a Redistributor that is engaged only in external
distribution of data. For example, non-display data can be used by data
recipients for a wide variety of profit-generating purposes, including
proprietary and agency trading and smart order routing, as well as by
data recipients that operate order matching and execution platforms
that compete directly with the Exchange for order flow. The data also
can be used for a variety of non-trading purposes that indirectly
support trading, such as risk management and compliance. Although some
of these non-trading uses do not directly generate revenues, they can
nonetheless substantially reduce the recipient's costs by automating
such functions so that they can be carried out in a more efficient and
accurate manner and reduce errors and labor costs, thereby benefiting
end users. The Exchange believes that charging a different access fee
for a Redistributor that is engaged solely in external distribution of
only the NYSE American BBO and NYSE American Trades products is
equitable because it would make NYSE BQT available to more data
recipients that are customers of such Redistributors and who would not
otherwise be able to access NYSE BQT if their Redistributor did not
subscribe to and redistribute NYSE BQT.
Redistribution Fees. The Exchange believes the proposed change to
provide a waiver of the Redistribution Fee to a Redistributor that
would be eligible for the Per User Access Fee because it only
externally redistributes NYSE American Trades to at least one data feed
recipient is equitably allocated. The proposed change would apply
equally to all Redistributors that are eligible for the Per User Access
Fee and choose to externally redistribute the NYSE American Trades
product, and would serve as an incentive for Redistributors to make
NYSE American Trades more broadly available for use by both
Professional and Non-Professional Users. This, in turn, could provide
an incentive for Redistributors that do not currently subscribe to any
NYSE American market data products to subscribe to NYSE BQT and make it
available to their customers.
For all of the foregoing reasons, the Exchange believes that the
proposed fees for the NYSE American market data products are equitably
allocated.
The Proposed Fees Are Not Unfairly Discriminatory
The Exchange believes the proposed fees are not unfairly
discriminatory because any differences in the application of the fees
are based on meaningful distinctions between customers, and those
meaningful distinctions are not unfairly discriminatory between
customers.
Overall. As noted above, this proposed fee change is a result of
the competitive environment for market data products that provide
indicative pricing information across a family of exchanges. To respond
to this competitive environment, the Exchange seeks to amend its fees
to provide a financial incentive for Redistributors that do not
currently subscribe to any NYSE American market data products that
decide to subscribe to NYSE BQT, which the Exchange hopes will attract
more subscribers for the NYSE BQT market data product. The Exchange is
proposing the fee reductions to make the Exchange's fees more
competitive for a specific segment of market participants, thereby
increasing the availability of the Exchange's data products, expanding
the options available to firms making data purchasing decisions based
on their business needs, and generally increasing competition.
Access Fee. The Exchange believes that making the Per User Access
Fee available to Redistributors that would be subscribing only to the
NYSE American BBO and NYSE American Trades data feeds and would use
these market data products for external distribution only is not
unfairly discriminatory as it would apply equally to all Redistributors
that choose to subscribe to NYSE American BBO or NYSE American Trades
for external distribution only and who do not subscribe to any other
products listed on the Fee Schedule. Because NYSE American BBO and NYSE
American
[[Page 73566]]
Trades are optional products, any data recipient could choose to
subscribe only to NYSE American BBO or NYSE American Trades to
distribute externally and be eligible for the proposed reduced fee. The
Exchange does not believe that it is unfairly discriminatory that this
proposed fee reduction would be available only to data recipients that
subscribe only to NYSE American BBO or NYSE American Trades and only
for external distribution. Internal use of data represents a different
set of use cases than a Redistributor that is engaged only in external
distribution of data. For example, non-display data can be used by data
recipients for a wide variety of profit-generating purposes, including
proprietary and agency trading and smart order routing, as well as by
data recipients that operate order matching and execution platforms
that compete directly with the Exchange for order flow. The data also
can be used for a variety of non-trading purposes that indirectly
support trading, such as risk management and compliance. While some of
these non-trading uses do not directly generate revenues, they can
nonetheless substantially reduce the recipient's costs by automating
such functions so that they can be carried out in a more efficient and
accurate manner and reduce errors and labor costs, thereby benefiting
end users. The Exchange therefore believes that there is a meaningful
distinction between internal use and redistribution of market data and
that charging a different access fee to a Redistributor that is engaged
solely in external distribution of only the NYSE American BBO and NYSE
American Trades products is not unfairly discriminatory because it
would make NYSE BQT available to more data recipients that are
customers of such Redistributors and who would not otherwise be able to
access NYSE BQT if their Redistributor did not subscribe to and
redistribute NYSE BQT.
Moreover, the Exchange does not believe that it is unfairly
discriminatory to offer the Per User Access Fee only to those
Redistributors that would subscribe only to the NYSE American BBO and
NYSE American Trades data feeds and no other products on the Fee
Schedule, and only for external distribution. The Exchange does not
currently have any Redistributors that fit this description. This
proposed rule change is designed to provide an incentive for
Redistributors that do not currently subscribe to NYSE BQT or any other
products listed on the Fee Schedule, but have customers that are
interested in subscribing to NYSE BQT, to subscribe to the NYSE
American BBO and NYSE American Trades data feeds so that they can make
NYSE BQT available to their customers. This fee incentive is not
necessary for Redistributors that currently subscribe to the NYSE
American BBO and NYSE American Trades data feeds because such
Redistributors could already subscribe to NYSE BQT, but have chosen not
to, and a reduction in their existing access fees would likely not
result in such Redistributors choosing to subscribe to NYSE BQT.
Redistribution Fees. The Exchange believes the proposed change to
provide a waiver of the Redistribution Fee to a Redistributor that
would be eligible for the Per User Access Fee because it only
externally redistributes NYSE American Trades to at least one data
recipient is not unfairly discriminatory. The proposed waiver would
apply equally to all Redistributors that are eligible for the Per User
Access Fee and choose to externally redistribute the NYSE American
Trades product, and would serve as an incentive for Redistributors that
do not currently subscribe to any NYSE American market data products to
subscribe to NYSE American Trades and then make NYSE BQT available to
their customers.
For all of the foregoing reasons, the Exchange believes that the
proposed fees are not unfairly discriminatory.
B. Self-Regulatory Organization's Statement on Burden on Competition
The Exchange does not believe that the proposed rule change will
impose any burden on competition that is not necessary or appropriate
in furtherance of the purposes of the Act. Indeed, as demonstrated
above, the Exchange believes the proposed rule changes are pro-
competitive.
Intramarket Competition. The Exchange believes that the proposed
fees do not put any market participants at a relative disadvantage
compared to other market participants. As noted above, the proposed fee
schedule would apply to all subscribers of NYSE American market data
products, and customers may not only choose whether to subscribe to the
products at all, but also may tailor their subscriptions to include
only the products and uses that they deem suitable for their business
needs. The Exchange also believes that the proposed fees neither favor
nor penalize one or more categories of market participants in a manner
that would impose an undue market on competition. As shown above, to
the extent that particular proposed fees apply to only a subset of
subscribers, those distinctions are not unfairly discriminatory and do
unfairly burden one set of customers over another.
Intermarket Competition. The Exchange believes that the proposed
fees do not impose a burden on competition on other exchanges that is
not necessary or appropriate; indeed, the Exchange believes the
proposed fee changes would have the effect of increasing competition.
As demonstrated above and in Professor Rysman's paper, exchanges are
platforms for market data and trading. In setting the proposed fees,
the Exchange is constrained by the availability of substitute platforms
also offering market data products and trading, and low barriers to
entry mean new exchange platforms are frequently introduced. The fact
that exchanges are platforms ensures that no exchange can make pricing
decisions for one side of its platform without considering, and being
constrained by, the effects that price will have on the other side of
the platform. In setting fees at issue here, the Exchange is
constrained by the fact that, if its pricing across the platform is
unattractive to customers, customers will have its pick of an
increasing number of alternative platforms to use instead of the
Exchange. Given this intense competition between platforms, no one
exchange's market data fees can impose an unnecessary burden on
competition, and the Exchange's proposed fees do not do so here.
In addition, the Exchange believes that the proposed fees do not
impose a burden on competition or on other exchanges that is not
necessary or appropriate because of the availability of numerous
substitute market data products. Specifically, as described above, NYSE
BQT competes head-to-head with the Nasdaq Basic product and the Cboe
One Feed. These products each serve as reasonable substitutes for one
another as they are each designed to provide investors with a unified
view of real-time quotes and last-sale prices in all Tape A, B, and C
securities. Each product provides subscribers with consolidated top-of-
book quotes and trades from multiple U.S. equities markets. NYSE BQT
provides top-of-book quotes and trades data from five NYSE-affiliated
U.S. equities exchanges, while Cboe One Feed similarly provides top-of-
book quotes and trades data from Cboe's four U.S. equities exchanges.
NYSE BQT, Nasdaq Basic, and Cboe One Feed are all intended to provide
indicative pricing and therefore, are reasonable substitutes for one
another. Additionally, market data vendors are also able to offer close
substitutes to NYSE BQT. Because market data users can find suitable
substitute feeds, an
[[Page 73567]]
exchange that overprices its market data products stands a high risk
that users may substitute another source of market data information for
its own. These competitive pressures ensure that no one exchange's
market data fees can impose an unnecessary burden on competition, and
the Exchange's proposed fees do not do so here.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were solicited or received with respect to the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change is effective upon filing pursuant to
Section 19(b)(3)(A) \84\ of the Act and subparagraph (f)(2) of Rule
19b-4 \85\ thereunder, because it establishes a due, fee, or other
charge imposed by the Exchange.
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\84\ 15 U.S.C. 78s(b)(3)(A).
\85\ 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) \86\ of the Act to determine whether the proposed
rule change should be approved or disapproved.
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\86\ 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-NYSEAMER-2020-79 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-NYSEAMER-2020-79. 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-NYSEAMER-2020-79, and should be
submitted on or before December 9, 2020.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\87\
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\87\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-25390 Filed 11-17-20; 8:45 am]
BILLING CODE 8011-01-P
