Self-Regulatory Organizations; The Nasdaq Stock Market LLC; 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, 81237-81242 [2020-27484]
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Federal Register / Vol. 85, No. 241 / Tuesday, December 15, 2020 / Notices
apply during an opening does not
impose an undue burden on
competition as it would provide more
specificity on how this functionality
currently operates. A similar change
was recently made to BX’s Rules.74 The
Exchange notes that the same
procedures used during an opening are
used to reopen an option series after a
trading halt, and therefore proposes to
specify that Anti-Internalization will not
apply during the opening (i.e., the
opening and halt reopening processes).
During the opening, Market Makers are
able to observe the primary market and
then determine how they would like to
quote. They are not required to quote in
the opening on NOM. Therefore, AntiInternalization is unnecessary during an
opening due to the high level of control
that Market Makers exercise over their
quotes during this process.
Options 3, Section 23
The Exchange’s proposal to amend
Options 3, Section 23, Data Feeds and
Trade Information, to update its
descriptions of the ITTO data feed does
not impose an undue burden on
competition because the updated
descriptions will bring greater
transparency to the Exchange’s rules
and more closely align with current
System operation.
The Exchange’s proposal will make
clear that order imbalance information
is provided for both an opening and reopening process. Today, a re-opening
process initiates after a trading halt has
occurred intra-day. Also, the Exchange’s
proposal notes the specific information
that would be provided, namely the size
of matched contracts and size of the
imbalance. The Exchange believes that
this additional context to imbalance
messages will provide market
participants with more complete
information about what is contained in
the data feed. The Exchange notes that
this information is available today and
the rule text is being amended to make
clear what information is currently
provided.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
Because the foregoing proposed rule
change does not: (i) Significantly affect
74 See Securities Exchange Act Release No. 89759
(September 3, 2020). 85 FR 55877 (September 10,
2020) (SR–BX–2020–023).
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the protection of investors or the public
interest; (ii) impose any significant
burden on competition; and (iii) become
operative for 30 days from the date on
which it was filed, or such shorter time
as the Commission may designate, it has
become effective pursuant to Section
19(b)(3)(A)(iii) of the Act 75 and
subparagraph (f)(6) of Rule 19b–4
thereunder.76
At any time within 60 days of the
filing of the 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
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include File Number SR–
NASDAQ–2020–083 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–NASDAQ–2020–083. 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
75 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6)(iii) requires a self-regulatory organization to
give the Commission written notice of its intent to
file the proposed rule change, along with a brief
description and text of the proposed rule change,
at least five business days prior to the date of filing
of the proposed rule change, or such shorter time
as designated by the Commission. The Exchange
has satisfied this requirement.
76 17
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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–NASDAQ–2020–083, and
should be submitted on or before
January 5, 2021.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.77
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–27483 Filed 12–14–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90616; File No. SR–
NASDAQ–2020–086]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; 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 BrokerDealers Distributing Nasdaq Last Sale
to Professional Subscribers at Equity
7, Section 139
December 9, 2020.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on December
7, 2020, The Nasdaq Stock Market LLC
(‘‘Nasdaq’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘SEC’’ or ‘‘Commission’’) the proposed
rule change as described in Items I, II,
77 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
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Federal Register / Vol. 85, No. 241 / Tuesday, December 15, 2020 / Notices
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 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 (‘‘NLS’’) to Professional Subscribers
at Equity 7, Section 139.
The text of the proposed rule change
is available on the Exchange’s website at
https://listingcenter.nasdaq.com/
rulebook/nasdaq/rules, at the principal
office of the Exchange, and at the
Commission’s Public Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
Exchange has prepared summaries, set
forth in sections A, B, and C below, of
the most significant aspects of such
statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
Nasdaq proposes to lower the
enterprise license fee for broker-dealers
distributing Nasdaq Basic to internal
Professional Subscribers 3 from a twotiered fee of $365,000, plus $2 for any
Professional Subscribers over 16,000, to
3 A ‘‘Professional Subscriber’’ is any Subscriber
other than a Non-Professional Subscriber. A ‘‘NonProfessional Subscriber’’ is ‘‘a natural person who
is not (i) registered or qualified in any capacity with
the Commission, the Commodity Futures Trading
Commission, any state securities agency, any
securities exchange or association, or (ii) any
commodities or futures contract market or
association; engaged as an ‘investment adviser’ as
that term is defined in Section 201(11) of the
Investment Advisers Act of 1940 (whether or not
registered or qualified under that Act); or (iii)
employed by a bank or other organization exempt
from registration under federal or state securities
laws to perform functions that would require
registration or qualification if such functions were
performed for an organization not so exempt.’’ See
Equity 7 Pricing Schedule, Section 147(d)(4).
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a flat fee of $155,000. The license would
otherwise remain unchanged. The
enterprise license fee for broker-dealers
distributing NLS to internal Professional
Subscribers would be changed in a
similar fashion: The two-tiered fee of
$365,000, plus $2 for any Professional
Subscribers over 16,000, would be
replaced with a flat fee of $155,000.
Both fee reductions are designed to help
Nasdaq compete against other
exchanges selling top-of-book 4 market
data products.
The Exchange initially filed the
proposed pricing changes on September
30, 2020 (SR–NASDAQ–2020–065). On
November 23, 2020, the Exchange
withdrew that filing and replaced it
with SR–NASDAQ–2020–080. On
December 3, 2020, the Exchange
withdrew SR–NASDAQ–2020–080 and
replaced it with SR–NASDAQ–2020–
085. On December 7, 2020, the
Exchange replaced SR–NASDAQ–2020–
085 with this filing.
Nasdaq Basic and Nasdaq Last Sale
Nasdaq Basic is a real-time market
data product that offers best bid and
offer and last sale information for all
U.S. exchange-listed securities based on
liquidity within the Nasdaq market
center and trades reported to the
FINRA/Nasdaq Trade Reporting Facility
(‘‘TRF’’). It is a subset of the ‘‘core’’
quotation and last sale data provided by
securities information processors
(‘‘SIPs’’) distributing consolidated data
pursuant to the CTA/CQ Plan and the
UTP Plan. Nasdaq Basic is separated
into three components, which may be
purchased individually or in
combination: (i) Nasdaq Basic for
Nasdaq, which contains the best bid and
offer on the Nasdaq market center and
last sale transaction reports for Nasdaq
and the FINRA/Nasdaq TRF for Nasdaqlisted stocks; (ii) Nasdaq Basic for
NYSE, which covers NYSE-listed stocks,
and (iii) Nasdaq Basic for NYSE
American, which provides data on
stocks listed on NYSE American and
other listing venues that disseminate
quotes and trade reports on Tape B. The
specific data elements available through
Nasdaq Basic are: (i) Nasdaq Basic
Quotes (‘‘QBBO’’), the best bid and offer
and associated size available in the
Nasdaq Market Center, as well as last
sale transaction reports; (ii) Nasdaq
opening and closing prices, as well as
IPO and trading halt cross prices; and
(iii) general exchange information,
4 ‘‘Top-of-book’’ market data products provide
last sale information, or both last sale and best bid
and offer information to the user, without
additional ‘‘depth of book’’ data. Both Nasdaq Last
Sale and Nasdaq Basic are examples of top-of-book
products.
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including systems status reports, trading
halt information, and a stock directory.
NLS provides real-time last sale
information for executions occurring
within the Nasdaq market center and
trades reported to the jointly-operated
FINRA/Nasdaq TRF.5 The NLS data
feed, which provides price, volume and
time of execution data for last sale
transactions, includes transaction
information for Nasdaq-listed stocks
(‘‘NLS for Nasdaq’’) and for stocks listed
on NYSE, NYSE American, and other
Tape B listing venues (‘‘NLS for NYSE/
NYSE American’’).6 This is also a noncore product that provides a subset of
the core last sale data distributed by the
SIPs under the CTA/CQ Plan and the
UTP Plan.7
Current Top-of-Book Enterprise
Licenses for Internal Professional
Subscribers
Broker-dealers may purchase Nasdaq
Basic, or Derived Data 8 therefrom, for
internal professional use for a monthly
per-Subscriber fee of $26,9 or, in lieu of
a per-Subscriber fee, purchase an
enterprise license for the internal
distribution of Nasdaq Basic to
Professional Subscribers for $365,000,
plus $2 for any Professional Subscribers
over 16,000 if an external Distributor 10
controls the display of the product.11
5 See Securities Exchange Act Release No. 57965
(June 16, 2008), 73 FR 35178 (June 20, 2008) (SR–
NASDAQ–2006–060) (proposing NLS); see also
Securities Exchange Act Release No. 57965 (June
16, 2008), 73 FR 35178 (June 20, 2008) (SR–
NASDAQ–2006–060) (approving SR–NASDAQ–
2006–060, as amended by Amendment Nos. 1 and
2, to implement NLS on a pilot basis).
6 See Securities Exchange Act Release No. 57965
(June 16, 2008), 73 FR 35178 (June 20, 2008) (SR–
NASDAQ–2006–060).
7 See Securities Exchange Act Release No. 34–
82723 (February 15, 2018), 83 FR 7812 (February
22, 2018) (SR–NASDAQ–2018–010).
8 ‘‘Derived Data’’ is ‘‘pricing data or other
information that is created in whole or in part from
Nasdaq information; it cannot be reverse engineered
to recreate Nasdaq information, or be used to create
other data that is recognizable as a reasonable
substitute for Nasdaq information.’’ See Equity 7,
Section 147(d)(6).
9 See Equity 7 Pricing Schedule, Section
147(b)(1). The $26 monthly per-Subscriber fee
consists of monthly charges of $13 for Nasdaq Basic
for Nasdaq, $6.50 for Nasdaq Basic for NYSE, and
$6.50 for Nasdaq Basic for NYSE MKT.
10 ‘‘Distributor’’ refers to ‘‘any entity that receives
Nasdaq Basic data directly from Nasdaq or
indirectly through another entity and then
distributes it to one or more Subscribers. (A)
‘‘Internal Distributors’’ are Distributors that receive
Nasdaq Basic data and then distribute that data to
one or more Subscribers within the Distributor’s
own entity. (B) ‘‘External Distributors’’ are
Distributors that receive Nasdaq Basic data and then
distribute that data to one or more Subscribers
outside the Distributor’s own entity. See Equity 7,
Section 147(d)(1).
11 The additional $2 fee was introduced to defray
additional costs incurred by Nasdaq when
distributing Nasdaq Basic through an External
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Federal Register / Vol. 85, No. 241 / Tuesday, December 15, 2020 / Notices
The license also allows the brokerdealer to display NLS data for its own
stock price and that of up to ten of its
competitors or peers on its internal
website. Separate licenses must be
purchased if more than one external
Distributor controls display of the
product. The license excludes
Distributor fees, which are $1,500 per
month for internal distribution.12
Although NLS was initially designed
for general distribution to individual
investors,13 a broker-dealer may elect to
distribute this data to its registered
representatives through an employerprovided workstation or software
application. To allow for such usage,
Nasdaq adopted a fee schedule for
‘‘specialized usage’’ of NLS not
associated with distribution of data to
the general investing public. In general,
broker-dealers paying for specialized
usage track either the number of
Subscribers receiving data or the
number of queries for the data, and pay
the corresponding fee.
As an alternative to per-Subscriber or
per-query fees, however, a broker-dealer
may purchase an enterprise license for
internal Subscribers to receive NLS, or
Derived Data therefrom, through an
external Distributor that controls
display of the product. The fee is
$365,000 per month for up to 16,000
internal Subscribers, plus $2 for each
additional internal Subscriber over
16,000, the same fee structure as the
enterprise license for the internal
distribution of Nasdaq Basic to
Professionals. A separate enterprise
license must be purchased for each
external Distributor that controls the
display of the product. The enterprise
license does not include distributor fees.
Proposed Fee Reduction for Nasdaq
Basic and NLS Enterprise Licenses
Nasdaq proposes to reduce its
enterprise license fees for Nasdaq Basic
and NLS to bolster its ability to compete
effectively against other exchanges
selling top-of-book market data
products, which are substitutes for
Nasdaq Basic and NLS. Nasdaq faces
vigorous competition for the sale of this
Distributor that controls display of the product. See
Securities Exchange Act Release No. 71507
(February 7, 2014), 79 FR 8763 (February 13, 2014)
(SR–NASDAQ–2014–011).
12 See Equity 7 Pricing Schedule, Section
147(c)(1).
13 See Securities Exchange Act Release No. 82723
(February 15, 2018), 83 FR 7812 (February 22, 2018)
(SR–Nasdaq–2018–010) (explaining that ‘‘NLS was
designed to enable market-data ‘distributors to
provide free access to the data contained in NLS to
millions of individual investors via the internet and
television’ and was expected to ‘increase the
availability of Nasdaq proprietary market data to
individual investors.’ ’’).
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data, including from the ‘‘Best Quote
and Trade’’ (‘‘BQT’’) product sold by the
NYSE-affiliated exchanges and the Cboe
One Summary Feed.
Nasdaq received customer feedback
requesting that it lower the price of the
professional licenses for its top-of-book
products. This feedback prompted a
reexamination of Nasdaq’s four
enterprise licenses for top-of-book data:
(i) The license for internal Professional
distribution of Nasdaq Basic to
Professionals for $365,000 per month
(the subject of this proposal); (ii) the
license for external distribution of
Nasdaq Basic to Professionals and NonProfessionals in the context of the
brokerage relationship for $100,000 per
month; 14 (iii) the license for external
distribution of NLS data to the General
Investing Public for Display Usage for
$41,500; 15 and (iv) the license for
internal and external distribution of topof-book 16 and depth-of-book 17 products
for $500,000 with a twelve-month
commitment, or a month-to-month fee
of $600,000.18
Fees for three of these four licenses
have been reduced in the last several
years. In 2016, Nasdaq lowered the fee
for external distribution of Nasdaq Basic
in the context of the brokerage
relationship from $350,000 to
$100,000.19 Also in 2016, the Exchange
reduced the monthly fee for the external
distribution of NLS data from $50,000 to
$41,500.20 In 2018, Nasdaq introduced
an enterprise license that substantially
lowered the cost of purchasing top-ofbook and depth-of-book data together by
replacing three separate enterprise
licenses—$365,000 for internal
distribution of Nasdaq Basic, $100,000
for external distribution in a brokerage
relationship, and $500,000 for
distribution of depth-of-book products—
with a single license for a monthly fee
of $500,000, with a twelve-month
service commitment.21
In light of customer feedback and
Nasdaq’s history of lowering fees for
top-of-book products, Nasdaq
14 See Equity 7 Pricing Schedule, Section
147(b)(5).
15 See Equity 7 Pricing Schedule, Section
139(b)(4).
16 The top-of-book products distributed under this
license are Nasdaq Basic, NLS and NLS Plus.
17 The depth-of-book products distributed under
this license are TotalView and Level 2.
18 See Equity 7 Pricing Schedule, Section 132.
19 See Securities Exchange Act Release No. 79456
(December 2, 2016), 81 FR 88716 (December 8,
2016) (SR–NASDAQ–2016–162).
20 See Securities Exchange Act Release No. 77578
(April 11, 2016), 81 FR 22344 (April 15, 2016) (SR–
NASDAQ–2016–048).
21 See Securities Exchange Act Release No. 83751
(July 31, 2018), 83 FR 38428 (August 6, 2018) (SR–
Nasdaq–2018–058).
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81239
determined that the proposed fee will
better position it to operate in the
current competitive environment. Fees
for Nasdaq’s other three enterprise
licenses have been lowered over the
course of the last four years, while the
license fee for internal professionals has
not changed since the enterprise license
was introduced in 2014.22 Nasdaq
believes that this fourth fee reduction
will allow it to continue to compete in
the market for top-of-book products.
The new enterprise license fee will
substantially lower total and perSubscriber costs for broker-dealers with
approximately 5,962 or more internal
Professional Subscribers. All current
enterprise license purchasers will save
the difference between the current base
fee of $365,000 and the proposed fee of
$155,000 (which is $210,000 per
month), plus $2 times the number of
internal Professional Subscribers over
16,000. A broker-dealer with 17,000
internal Professional Subscribers, for
example, would save a total of $212,000
per month as compared to the current
license,23 reducing average perSubscriber monthly charges from
$21.60 24 to $9.12.25
In addition, a number of the mid-size
broker-dealers that currently have too
few professional subscribers to benefit
from the license would be able to
achieve substantial savings at the new,
lower rate. The ‘‘break even’’ point—i.e.,
the point at which the average perSubscriber rate of a licensee falls below
the per-Subscriber rate of $26—is
currently 14,038 internal Professional
Subscribers.26 Under the new fee
schedule, broker-dealers with as few as
5,962 internal Professional Subscribers
would be able to save money.27 A
hypothetical broker-dealer with 10,000
internal Professional Subscribers would
22 See Securities Exchange Act Release No. 71507
(February 7, 2014), 79 FR 8763 (February 13, 2014)
(SR–NASDAQ–2014–011).
23 The broker-dealer would save the difference
between $365,000 and $155,000 ($210,000), plus an
additional $2,000 for the 1,000 Professional
Subscribers over 16,000.
24 The hypothetical current average perSubscriber monthly charge is estimated as the
current fee of $365,000 plus $2,000 for the 1,000
Professional Subscribers over 16,000 divided by
17,000 internal Professional Subscribers.
25 The hypothetical per-Subscriber monthly
charge for the Proposal is estimated as the flat fee
of $155,000 divided by 17,000 internal Professional
Subscribers.
26 See Securities Exchange Act Release No. 71507
(February 7, 2014), 79 FR 8763 (February 13, 2014)
(SR–NASDAQ–2014–011) (explaining that the
$365,000 monthly fee for all internal subscribers,
divided by $26 monthly fee for each internal
Subscriber, is equal to 14,038).
27 This estimated cutoff point is calculated as the
Proposed license fee of $155,000 divided by the
per-Subscriber rate of $26 per month.
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Federal Register / Vol. 85, No. 241 / Tuesday, December 15, 2020 / Notices
be able to save $105,000 per month,28
reducing per-Subscriber fees from $26 29
to $15.50.30
In addition to lowering Nasdaq’s fees,
the proposed rule change will allow
users to lower internal administrative
costs by eliminating the need to report
monthly usage. Nasdaq does not have
sufficient information about brokerdealer operations and costs to accurately
estimate these savings, but believes that
monthly savings in administrative
expenditures—as well as the improved
ability to project future expenditures
achieved by eliminating audit liability
for errors in reporting usage—to be
substantial.
Staff of the Commission’s Division of
Trading and Markets have indicated that
self-regulatory organizations (‘‘SROs’’)
proposing fee changes should provide
‘‘the projected number of purchasers
(including members, as well as nonmembers) of any new or modified
product or service . . . .’’ 31 Prior to the
proposed change, two customers had
purchased the Nasdaq Basic
Professional Subscriber enterprise
license for $365,000, plus $2 for any
Professional Subscriber over 16,000 if
an external Distributor controls the
display of the product.32 Of these two
customers, one informed Nasdaq that it
would abandon the Nasdaq license in
favor of a license offered by one of its
two major competitors, Cboe and NYSE.
After the proposed license fee was
instituted on October 1, 2020, the
complaining customer decided to retain
the license. Nasdaq is also in
discussions with additional customers
to purchase the license, including both
customers that do not currently
purchase Nasdaq Basic, and customers
that do purchase Nasdaq Basic, but not
through an enterprise license. To date,
however, no new firms have purchased
the enterprise license.
While any broker-dealer with
approximately 5,962 or more internal
Subscribers will be able to benefit from
the proposed license, Nasdaq does not
know, and is unable to ascertain with
precision, the number of internal
28 Savings are calculated as follows: 10,000
internal Professional Subscribers multiplied by $26
per-Subscriber equals $260,000. The difference
between $260,000 and $155,000 is $105,000.
29 See Equity 7 Pricing Schedule, Section
147(b)(1).
30 This figure is calculated as the proposed flat fee
of $155,000 divided by 10,000 internal Professional
Subscribers.
31 See Division of Trading and Markets, U.S.
Securities and Exchange Commission, ‘‘Staff
Guidance on SRO Filings Related to Fees (May 21,
2019), available at https://www.sec.gov/tm/staffguidance-sro-rule-filings-fees.
32 No customers purchased the comparable
license for NLS, discussed above.
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18:38 Dec 14, 2020
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Professional Subscribers utilized by
various broker-dealers, nor can it
anticipate the actions of its competitors
in response to the lower enterprise
license fee, and therefore cannot project
precisely the number of expected
purchasers. Nevertheless, judging from
expressions of interest and Nasdaq’s
experience in the financial services
industry, Nasdaq estimates that between
fifteen and twenty broker-dealers
worldwide may elect to purchase the
license.33
2. Statutory Basis
The Exchange believes that its
Proposal is consistent with Section 6(b)
of the Act,34 in general, and furthers the
objectives of Sections 6(b)(4) and 6(b)(5)
of the Act,35 in particular, in that it
provides for the equitable allocation of
reasonable dues, fees and other charges
among members and issuers and other
persons using any facility, and is not
designed to permit unfair
discrimination between customers,
issuers, brokers, or dealers.
As a preliminary manner, the
statutory basis for the current Nasdaq
Basic and NLS enterprise licenses have
already been explained in prior
filings.36 The Proposal lowers fees for
enterprise licenses that have already
been shown to be consistent with
Section 6(b) of the Act, and this analysis
therefore focuses on the new, lower
fees.37
The Proposal Is an Equitable Allocation
of Reasonable Dues, Fees and Other
Charges
As the Commission and courts 38 have
recognized, ‘‘[i]f competitive forces are
33 This estimate is based on customer
conversations and the experience and judgment of
Nasdaq staff.
34 See 15 U.S.C. 78f(b).
35 See 15 U.S.C. 78f(b)(4) and (5).
36 See, e.g., Securities Exchange Act Release No.
81697 (September 25, 2017), 82 FR 45639
(September 29, 2017) (SR–NASDAQ–2017–095);
Securities Exchange Act Release No. 72620 (July 16,
2014), 79 FR 42572 (July 22, 2014) (SR–NASDAQ–
2014–070); Securities Exchange Act Release No.
72153 (May 12, 2014), 79 FR 28575 (May 16, 2014)
(SR–NASDAQ–2014–045); Securities Exchange Act
Release No. 71507 (February 7, 2014), 79 FR 8763
(February 13, 2014) (SR–NASDAQ–2014–011); see
Securities Exchange Act Release No. 82723
(February 15, 2018), 83 FR 7812 (February 22, 2018)
(SR–Nasdaq–2018–010).
37 The statutory bases for both the Nasdaq Basic
and NLS enterprise licenses are identical. Both are
top-of-book products sold to broker-dealers for
internal distribution to Professionals. The fee
structure and use requirements are currently the
same for both, and will continue to be the same
under the Proposal. The discussion contained
herein therefore applies to both licenses.
38 The decision of the United States Court of
Appeals for the District of Columbia Circuit in
NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 2010)
upheld the Commission’s reliance upon
PO 00000
Frm 00065
Fmt 4703
Sfmt 4703
operative, the self-interest of the
exchanges themselves will work
powerfully to constrain unreasonable or
unfair behavior.’’ 39 Accordingly, ‘‘the
existence of significant competition
provides a substantial basis for finding
that the terms of an exchange’s fee
proposal are equitable, fair, reasonable,
and not unreasonably or unfairly
discriminatory.’’ 40 Nasdaq believes that
competitive forces constrain the price of
top-of-book products based on
competition among exchanges for topof-book data. The proposed fee change
is a direct response to this competition.
Nasdaq Basic and NLS provide
choices to broker-dealers and other data
consumers by providing less than the
quantum of data provided through the
consolidated tape feeds, but at a lower
price. The same is true for the top-ofbook proprietary products offered by
other exchanges. All of these top-ofbook products are substitutes for each
other. Nasdaq Basic provides data
derived from liquidity within the
Nasdaq market center and trades
reported to the FINRA/Nasdaq TRF. The
NYSE BQT feed disseminates top-ofbook information from the NYSE, NYSE
American, NYSE Arca and NYSE
National exchanges.41 The Cboe One
Summary Feed provides data from the
four Cboe equities exchanges: BZX
Exchange, BYX Exchange, EDGX
Exchange and EDGA Exchange.42 These
exchanges compete on price and quality
competitive markets to set reasonable and equitably
allocated fees for 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.’’ NetCoalition I, at 535 (quoting H.R. Rep.
No. 94–229, at 92 (1975), as reprinted in 1975
U.S.C.C.A.N. 321, 323) (internal quotation marks
omitted). 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.’’ Id. (quoting
Securities Exchange Act Release No. 59039
(December 2, 2008), 73 FR 74770, 74,771 (December
9, 2008) (SR–NYSEArca–2006–21)).
39 See Securities Exchange Act Release No. 59039
(December 2, 2008), 73 FR 74770 (December 9,
2008) (SR–NYSEArca–2006–21).
40 Id.
41 See https://www.nyse.com/market-data/realtime/nyse-bqt.
42 See https://markets.cboe.com/us/equities/
market_data_services/#:∼:
text=Cboe%20Top%20is%20a
%20real,time%20on%20a%20Cboe%20book.
&text=It%20is%20a%20real%2Dtime,
time%20on%20a%20Cboe%20book We note that
Cboe recently proposed a fee reduction for top-ofbook data as well. See Securities Exchange Act
Release No. 86670 (August 14, 2019), 84 FR 43207
(August 20, 2019) (SR–CboeBYX–2019–012).
E:\FR\FM\15DEN1.SGM
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Federal Register / Vol. 85, No. 241 / Tuesday, December 15, 2020 / Notices
for their top-of-book feeds. NYSE 43 and
Cboe,44 like Nasdaq, offer enterprise
licenses. Cboe touts its price in
promotional literature,45 and reduced
its fee for certain top-of-book customers
just this year.46
Top-of-book data can be used for
many purposes—from a retail investor
casually surveying the market to
sophisticated market participants using
it for a variety of applications, such as
investment analysis, risk management,
or portfolio valuation. The value of that
data depends on its quality and how
well it approximates the NBBO, which
is determined by the amount of order
flow attracted by the exchange—the
more order flow, the more quotes and
trades, and the better the exchange data
will be able to match the NBBO.
Nasdaq’s own experience with sales
of top-of-book feeds underscores their
substitutability, as the customer whose
feedback motivated this price change
informed Nasdaq that it would drop
Nasdaq Basic in favor of a competing
product unless a change is made.
The constraint imposed by direct
competition on the price of top-of-book
data is further illustrated by proposals
to reduce fees for three of the four topof-book enterprise licenses in the past
several years: (i) The enterprise license
for external distribution of Nasdaq
Basic; 47 (ii) the enterprise license for
the external distribution of NLS; 48 and
(iii) the combined enterprise license for
distribution of top-of-book and depth-ofbook data.49 Nasdaq is not alone in
lowering fees to compete against the
other exchanges. Just this year, Cboe
43 See https://www.nyse.com/market-data/realtime/nyse-bqt.
44 See https://markets.cboe.com/us/equities/
market_data_services/cboe_one/.
45 See https://markets.cboe.com/us/equities/
market_data_services/#:∼:text=Cboe%20Top%20is
%20a%20real,time%20on%20a%20Cboe%20
book.&text=It%20is%20a%20real%2Dtime,
time%20on%20a%20Cboe%20book (‘‘The Cboe
One Feed is 60% less expensive per professional
user and more than 85% less expensive for an
enterprise license for professional users and nonprofessional users when compared to a similar
competitor exchange product.’’).
46 See Securities Exchange Act Release No. 88221
(February 14, 2020), 85 FR 9904 (February 20, 2020)
(SR–CboeBYX–2020–007) (stating that ‘‘the
Exchange’s top of book market data products are
among the most competitively priced in the
industry due to modest subscriber fees, and a lower
Enterprise cap . . . .’’). The filing included a table
comparing its pricing to Nasdaq Basic.
47 See Securities Exchange Act Release No. 79456
(December 2, 2016), 81 FR 88716 (December 8,
2016) (SR–NASDAQ–2016–162).
48 See Securities Exchange Act Release No. 77578
(April 11, 2016), 81 FR 22344 (April 15, 2016) (SR–
NASDAQ–2016–048).
49 See Securities Exchange Act Release No. 83751
(July 31, 2018), 83 FR 38428 (August 6, 2018) (SR–
Nasdaq–2018–058).
VerDate Sep<11>2014
17:35 Dec 14, 2020
Jkt 253001
proposed a fee reduction for its top-ofbook data.50
As shown, Nasdaq competes against
other exchanges in the sale of top-ofbook products. That competition
constrains the price of top-of-book
market data, and provides a substantial
basis for finding that the terms of an
exchange’s fee proposal are equitable,
fair, reasonable, and not unreasonably
or unfairly discriminatory.
The Proposal Does Not Permit Unfair
Discrimination
The Proposal is not unfairly
discriminatory. As previously noted, the
Nasdaq Basic enterprise license subject
to this Proposal was shown to be nondiscriminatory and otherwise consistent
with the Act over six years ago.51 The
only difference between that initial
proposal and the change under
consideration today is that the new
license costs less and more brokerdealers will be able to benefit from the
lower prices. Enterprise licenses in
general have been widely recognized as
an effective and not unfairly
discriminatory method of distributing
market data. This applies to Nasdaq’s
enterprise licenses as well as those
offered by the NYSE and Cboe
exchanges.52
The Act does not prohibit all
distinctions among customers; only
discrimination that is unfair. It is not
unfair discrimination to charge those
Distributors that are able to reach the
largest audiences of retail investors a
lower fee for incremental investors in
order to encourage the widespread
distribution of market data.
The instant Proposal, like other
enterprise licenses, will cause top-ofbook data to become more widely
available to investors. It will save
current enterprise license purchasers
the $210,000 per month difference
between the current base fee of $365,000
and $155,000, plus $2 times the number
of internal Professional Subscribers over
16,000. Broker-dealers that do not
currently purchase the license will
nevertheless benefit because the ‘‘break
even’’ point—i.e., the point where the
average per-Subscriber rate of a licensee
falls below per-Subscriber rate of $26—
will fall from 14,038 to 5,962 internal
50 See Securities Exchange Act Release No. 86670
(August 14, 2019), 84 FR 43207 (August 20, 2019)
(SR–CboeBYX–2019–012).
51 See Securities Exchange Act Release No. 71507
(February 7, 2014), 79 FR 8763 (February 13, 2014)
(SR–NASDAQ–2014–011) (initially adopting the
current enterprise license).
52 See, e.g., Sections 123(c) and 147 (b); Securities
Exchange Act Release No. 82182 (November 30,
2017), 82 FR 57627 (December 6, 2017) (SR–NYSE–
2017–60) (changing an enterprise fee for NYSE BBO
and NYSE Trades).
PO 00000
Frm 00066
Fmt 4703
Sfmt 4703
81241
Professional Subscribers.53 All
purchasers of the proposed license will
also be able to save in administrative
expenditures by eliminating monthly
reporting requirements and periodic
review of such reports by compliance
staff.
It is of particular importance now to
expand the availability of top-of-book
data. In recent months, retail investors
have become increasingly interested in
equities markets. Many of these retail
investors will require advice and
assistance from equity market
professionals, and this license will
enable broker-dealers that serve such
clients to do so at a lower cost.
In addition, the proposed enterprise
license will be subject to significant
competition, and that competition will
ensure that there is no unfair
discrimination. Each Distributor will be
able to accept or reject the license
depending on whether it will or will not
lower costs for that particular
Distributor, and, if the license is not
sufficiently competitive, the Exchange
may lose market share.
For all of these reasons, the Proposal
is not unreasonably 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 not
necessary or appropriate in furtherance
of the purposes of the Act. With respect
to inter-market competition—the
competition among SROs—the
Exchange’s ability to price market data
products is constrained by competition
among exchanges for top-of-book data.
With respect to intra-market
competition—the competition among
consumers of exchange data—the
Exchange expects the Proposal to
promote competition through lower-cost
data.
Intermarket Competition
As discussed in detail under Statutory
Basis, Nasdaq competes with other
exchanges in the sale of top-of-book
products. In order to better compete for
this segment of the market, the
Exchange is proposing to reduce the
cost of top-of-book data by lowering the
enterprise license fee for internal
Professional Subscribers. The proposed
price reduction will not cause any
unnecessary or inappropriate burden on
intermarket competition, as other
53 See Securities Exchange Act Release No. 71507
(February 7, 2014), 79 FR 8763 (February 13, 2014)
(SR–NASDAQ–2014–011) (explaining that the
$365,000 monthly fee for all internal subscribers,
divided by $26 monthly fee for each internal
Subscriber, is equal to 14,038).
E:\FR\FM\15DEN1.SGM
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Federal Register / Vol. 85, No. 241 / Tuesday, December 15, 2020 / Notices
exchanges and data vendors are free to
lower their prices to better compete
with the Exchange’s offering. Nasdaq’s
main competitors, in particular, offer
directly competing enterprise licenses
for their top-of-book products, and are
readily able to lower enterprise license
fees in response to Nasdaq. Indeed, the
Exchange’s decision to lower its
enterprise license fee was itself
generated by the need to compete with
other exchanges. The Proposal may in
turn generate competitive responses
from other exchanges, enhancing overall
competition.
of investors; or (iii) otherwise in
furtherance of the purposes of the Act.
If the Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
Intramarket Competition
The Proposal will not cause any
unnecessary or inappropriate burden on
intramarket competition. In fact, it will
foster competition among broker-dealers
by lowering costs for current licensees,
while at the same time increasing the
number of broker-dealers able to
purchase that license. The current
enterprise license, just like all of the
enterprise licenses offered by Nasdaq’s
competitors, does not itself impose an
unnecessary or inappropriate burden on
intramarket competition. Relatively
smaller broker-dealers have fewer
internal Professional Subscribers and
therefore operate with lower fixed costs,
helping them compete with the larger
broker-dealers. Moreover, the
underlying fee of $26 per Professional
Subscriber fee has itself been shown not
to place an undue burden on
competition, and, if that fee proves to be
excessive, broker-dealers would be able
to purchase top-of-book data from one of
the Exchange’s competitors offering a
substitute product. For all of these
reasons, the Proposal will not place any
unnecessary or inappropriate burden on
intramarket competition.
Electronic Comments
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were either
solicited or received.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become
effective pursuant to Section
19(b)(3)(A)(ii) of the Act.54
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is: (i) Necessary or appropriate in
the public interest; (ii) for the protection
54 15
U.S.C. 78s(b)(3)(A)(ii).
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17:35 Dec 14, 2020
Jkt 253001
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:
• 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–
NASDAQ–2020–086 on the subject line.
• 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–NASDAQ–2020–086. 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–NASDAQ–2020–086 and
Frm 00067
Fmt 4703
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.55
J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020–27484 Filed 12–14–20; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–90612; File No. SR–
EMERALD–2020–16]
Self-Regulatory Organizations; MIAX
Emerald, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change To Amend Its Fee
Schedule To Establish Market Data
Fees
December 9, 2020.
Paper Comments
PO 00000
should be submitted on or before
January 5, 2021.
Sfmt 4703
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
25, 2020, MIAX Emerald, LLC (‘‘MIAX
Emerald’’ or ‘‘Exchange’’) filed with the
Securities and Exchange Commission
(‘‘Commission’’) the proposed rule
change as described in Items I, II, and
III below, which Items have been
prepared by the 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 is filing a proposal to
amend the MIAX Emerald Fee Schedule
(the ‘‘Fee Schedule’’) to establish market
data fees.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxoptions.com/rulefilings/emerald, at MIAX’s principal
office, and at the Commission’s Public
Reference Room.
II. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
55 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
E:\FR\FM\15DEN1.SGM
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]]>Agencies
[Federal Register Volume 85, Number 241 (Tuesday, December 15, 2020)]
[Notices]
[Pages 81237-81242]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2020-27484]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-90616; File No. SR-NASDAQ-2020-086]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
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
December 9, 2020.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on December 7, 2020, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``SEC'' or ``Commission'') the proposed rule change as described in
Items I, II,
[[Page 81238]]
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 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 (``NLS'') to Professional Subscribers at Equity 7, Section
139.
The text of the proposed rule change is available on the Exchange's
website at https://listingcenter.nasdaq.com/rulebook/nasdaq/rules, at
the principal office of the Exchange, and at the Commission's Public
Reference Room.
II. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The Exchange has prepared summaries, set forth in
sections A, B, and C below, of the most significant aspects of such
statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
Nasdaq proposes to lower the enterprise license fee for broker-
dealers distributing Nasdaq Basic to internal Professional Subscribers
\3\ from a two-tiered fee of $365,000, plus $2 for any Professional
Subscribers over 16,000, to a flat fee of $155,000. The license would
otherwise remain unchanged. The enterprise license fee for broker-
dealers distributing NLS to internal Professional Subscribers would be
changed in a similar fashion: The two-tiered fee of $365,000, plus $2
for any Professional Subscribers over 16,000, would be replaced with a
flat fee of $155,000. Both fee reductions are designed to help Nasdaq
compete against other exchanges selling top-of-book \4\ market data
products.
---------------------------------------------------------------------------
\3\ A ``Professional Subscriber'' is any Subscriber other than a
Non-Professional Subscriber. A ``Non-Professional Subscriber'' is
``a natural person who is not (i) registered or qualified in any
capacity with the Commission, the Commodity Futures Trading
Commission, any state securities agency, any securities exchange or
association, or (ii) any commodities or futures contract market or
association; engaged as an `investment adviser' as that term is
defined in Section 201(11) of the Investment Advisers Act of 1940
(whether or not registered or qualified under that Act); or (iii)
employed by a bank or other organization exempt from registration
under federal or state securities laws to perform functions that
would require registration or qualification if such functions were
performed for an organization not so exempt.'' See Equity 7 Pricing
Schedule, Section 147(d)(4).
\4\ ``Top-of-book'' market data products provide last sale
information, or both last sale and best bid and offer information to
the user, without additional ``depth of book'' data. Both Nasdaq
Last Sale and Nasdaq Basic are examples of top-of-book products.
---------------------------------------------------------------------------
The Exchange initially filed the proposed pricing changes on
September 30, 2020 (SR-NASDAQ-2020-065). On November 23, 2020, the
Exchange withdrew that filing and replaced it with SR-NASDAQ-2020-080.
On December 3, 2020, the Exchange withdrew SR-NASDAQ-2020-080 and
replaced it with SR-NASDAQ-2020-085. On December 7, 2020, the Exchange
replaced SR-NASDAQ-2020-085 with this filing.
Nasdaq Basic and Nasdaq Last Sale
Nasdaq Basic is a real-time market data product that offers best
bid and offer and last sale information for all U.S. exchange-listed
securities based on liquidity within the Nasdaq market center and
trades reported to the FINRA/Nasdaq Trade Reporting Facility (``TRF'').
It is a subset of the ``core'' quotation and last sale data provided by
securities information processors (``SIPs'') distributing consolidated
data pursuant to the CTA/CQ Plan and the UTP Plan. Nasdaq Basic is
separated into three components, which may be purchased individually or
in combination: (i) Nasdaq Basic for Nasdaq, which contains the best
bid and offer on the Nasdaq market center and last sale transaction
reports for Nasdaq and the FINRA/Nasdaq TRF for Nasdaq-listed stocks;
(ii) Nasdaq Basic for NYSE, which covers NYSE-listed stocks, and (iii)
Nasdaq Basic for NYSE American, which provides data on stocks listed on
NYSE American and other listing venues that disseminate quotes and
trade reports on Tape B. The specific data elements available through
Nasdaq Basic are: (i) Nasdaq Basic Quotes (``QBBO''), the best bid and
offer and associated size available in the Nasdaq Market Center, as
well as last sale transaction reports; (ii) Nasdaq opening and closing
prices, as well as IPO and trading halt cross prices; and (iii) general
exchange information, including systems status reports, trading halt
information, and a stock directory.
NLS provides real-time last sale information for executions
occurring within the Nasdaq market center and trades reported to the
jointly-operated FINRA/Nasdaq TRF.\5\ The NLS data feed, which provides
price, volume and time of execution data for last sale transactions,
includes transaction information for Nasdaq-listed stocks (``NLS for
Nasdaq'') and for stocks listed on NYSE, NYSE American, and other Tape
B listing venues (``NLS for NYSE/NYSE American'').\6\ This is also a
non-core product that provides a subset of the core last sale data
distributed by the SIPs under the CTA/CQ Plan and the UTP Plan.\7\
---------------------------------------------------------------------------
\5\ See Securities Exchange Act Release No. 57965 (June 16,
2008), 73 FR 35178 (June 20, 2008) (SR-NASDAQ-2006-060) (proposing
NLS); see also Securities Exchange Act Release No. 57965 (June 16,
2008), 73 FR 35178 (June 20, 2008) (SR-NASDAQ-2006-060) (approving
SR-NASDAQ-2006-060, as amended by Amendment Nos. 1 and 2, to
implement NLS on a pilot basis).
\6\ See Securities Exchange Act Release No. 57965 (June 16,
2008), 73 FR 35178 (June 20, 2008) (SR-NASDAQ-2006-060).
\7\ See Securities Exchange Act Release No. 34-82723 (February
15, 2018), 83 FR 7812 (February 22, 2018) (SR-NASDAQ-2018-010).
---------------------------------------------------------------------------
Current Top-of-Book Enterprise Licenses for Internal Professional
Subscribers
Broker-dealers may purchase Nasdaq Basic, or Derived Data \8\
therefrom, for internal professional use for a monthly per-Subscriber
fee of $26,\9\ or, in lieu of a per-Subscriber fee, purchase an
enterprise license for the internal distribution of Nasdaq Basic to
Professional Subscribers for $365,000, plus $2 for any Professional
Subscribers over 16,000 if an external Distributor \10\ controls the
display of the product.\11\
[[Page 81239]]
The license also allows the broker-dealer to display NLS data for its
own stock price and that of up to ten of its competitors or peers on
its internal website. Separate licenses must be purchased if more than
one external Distributor controls display of the product. The license
excludes Distributor fees, which are $1,500 per month for internal
distribution.\12\
---------------------------------------------------------------------------
\8\ ``Derived Data'' is ``pricing data or other information that
is created in whole or in part from Nasdaq information; it cannot be
reverse engineered to recreate Nasdaq information, or be used to
create other data that is recognizable as a reasonable substitute
for Nasdaq information.'' See Equity 7, Section 147(d)(6).
\9\ See Equity 7 Pricing Schedule, Section 147(b)(1). The $26
monthly per-Subscriber fee consists of monthly charges of $13 for
Nasdaq Basic for Nasdaq, $6.50 for Nasdaq Basic for NYSE, and $6.50
for Nasdaq Basic for NYSE MKT.
\10\ ``Distributor'' refers to ``any entity that receives Nasdaq
Basic data directly from Nasdaq or indirectly through another entity
and then distributes it to one or more Subscribers. (A) ``Internal
Distributors'' are Distributors that receive Nasdaq Basic data and
then distribute that data to one or more Subscribers within the
Distributor's own entity. (B) ``External Distributors'' are
Distributors that receive Nasdaq Basic data and then distribute that
data to one or more Subscribers outside the Distributor's own
entity. See Equity 7, Section 147(d)(1).
\11\ The additional $2 fee was introduced to defray additional
costs incurred by Nasdaq when distributing Nasdaq Basic through an
External Distributor that controls display of the product. See
Securities Exchange Act Release No. 71507 (February 7, 2014), 79 FR
8763 (February 13, 2014) (SR-NASDAQ-2014-011).
\12\ See Equity 7 Pricing Schedule, Section 147(c)(1).
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Although NLS was initially designed for general distribution to
individual investors,\13\ a broker-dealer may elect to distribute this
data to its registered representatives through an employer-provided
workstation or software application. To allow for such usage, Nasdaq
adopted a fee schedule for ``specialized usage'' of NLS not associated
with distribution of data to the general investing public. In general,
broker-dealers paying for specialized usage track either the number of
Subscribers receiving data or the number of queries for the data, and
pay the corresponding fee.
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\13\ See Securities Exchange Act Release No. 82723 (February 15,
2018), 83 FR 7812 (February 22, 2018) (SR-Nasdaq-2018-010)
(explaining that ``NLS was designed to enable market-data
`distributors to provide free access to the data contained in NLS to
millions of individual investors via the internet and television'
and was expected to `increase the availability of Nasdaq proprietary
market data to individual investors.' '').
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As an alternative to per-Subscriber or per-query fees, however, a
broker-dealer may purchase an enterprise license for internal
Subscribers to receive NLS, or Derived Data therefrom, through an
external Distributor that controls display of the product. The fee is
$365,000 per month for up to 16,000 internal Subscribers, plus $2 for
each additional internal Subscriber over 16,000, the same fee structure
as the enterprise license for the internal distribution of Nasdaq Basic
to Professionals. A separate enterprise license must be purchased for
each external Distributor that controls the display of the product. The
enterprise license does not include distributor fees.
Proposed Fee Reduction for Nasdaq Basic and NLS Enterprise Licenses
Nasdaq proposes to reduce its enterprise license fees for Nasdaq
Basic and NLS to bolster its ability to compete effectively against
other exchanges selling top-of-book market data products, which are
substitutes for Nasdaq Basic and NLS. Nasdaq faces vigorous competition
for the sale of this data, including from the ``Best Quote and Trade''
(``BQT'') product sold by the NYSE-affiliated exchanges and the Cboe
One Summary Feed.
Nasdaq received customer feedback requesting that it lower the
price of the professional licenses for its top-of-book products. This
feedback prompted a reexamination of Nasdaq's four enterprise licenses
for top-of-book data: (i) The license for internal Professional
distribution of Nasdaq Basic to Professionals for $365,000 per month
(the subject of this proposal); (ii) the license for external
distribution of Nasdaq Basic to Professionals and Non-Professionals in
the context of the brokerage relationship for $100,000 per month; \14\
(iii) the license for external distribution of NLS data to the General
Investing Public for Display Usage for $41,500; \15\ and (iv) the
license for internal and external distribution of top-of-book \16\ and
depth-of-book \17\ products for $500,000 with a twelve-month
commitment, or a month-to-month fee of $600,000.\18\
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\14\ See Equity 7 Pricing Schedule, Section 147(b)(5).
\15\ See Equity 7 Pricing Schedule, Section 139(b)(4).
\16\ The top-of-book products distributed under this license are
Nasdaq Basic, NLS and NLS Plus.
\17\ The depth-of-book products distributed under this license
are TotalView and Level 2.
\18\ See Equity 7 Pricing Schedule, Section 132.
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Fees for three of these four licenses have been reduced in the last
several years. In 2016, Nasdaq lowered the fee for external
distribution of Nasdaq Basic in the context of the brokerage
relationship from $350,000 to $100,000.\19\ Also in 2016, the Exchange
reduced the monthly fee for the external distribution of NLS data from
$50,000 to $41,500.\20\ In 2018, Nasdaq introduced an enterprise
license that substantially lowered the cost of purchasing top-of-book
and depth-of-book data together by replacing three separate enterprise
licenses--$365,000 for internal distribution of Nasdaq Basic, $100,000
for external distribution in a brokerage relationship, and $500,000 for
distribution of depth-of-book products--with a single license for a
monthly fee of $500,000, with a twelve-month service commitment.\21\
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\19\ See Securities Exchange Act Release No. 79456 (December 2,
2016), 81 FR 88716 (December 8, 2016) (SR-NASDAQ-2016-162).
\20\ See Securities Exchange Act Release No. 77578 (April 11,
2016), 81 FR 22344 (April 15, 2016) (SR-NASDAQ-2016-048).
\21\ See Securities Exchange Act Release No. 83751 (July 31,
2018), 83 FR 38428 (August 6, 2018) (SR-Nasdaq-2018-058).
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In light of customer feedback and Nasdaq's history of lowering fees
for top-of-book products, Nasdaq determined that the proposed fee will
better position it to operate in the current competitive environment.
Fees for Nasdaq's other three enterprise licenses have been lowered
over the course of the last four years, while the license fee for
internal professionals has not changed since the enterprise license was
introduced in 2014.\22\ Nasdaq believes that this fourth fee reduction
will allow it to continue to compete in the market for top-of-book
products.
---------------------------------------------------------------------------
\22\ See Securities Exchange Act Release No. 71507 (February 7,
2014), 79 FR 8763 (February 13, 2014) (SR-NASDAQ-2014-011).
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The new enterprise license fee will substantially lower total and
per-Subscriber costs for broker-dealers with approximately 5,962 or
more internal Professional Subscribers. All current enterprise license
purchasers will save the difference between the current base fee of
$365,000 and the proposed fee of $155,000 (which is $210,000 per
month), plus $2 times the number of internal Professional Subscribers
over 16,000. A broker-dealer with 17,000 internal Professional
Subscribers, for example, would save a total of $212,000 per month as
compared to the current license,\23\ reducing average per-Subscriber
monthly charges from $21.60 \24\ to $9.12.\25\
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\23\ The broker-dealer would save the difference between
$365,000 and $155,000 ($210,000), plus an additional $2,000 for the
1,000 Professional Subscribers over 16,000.
\24\ The hypothetical current average per-Subscriber monthly
charge is estimated as the current fee of $365,000 plus $2,000 for
the 1,000 Professional Subscribers over 16,000 divided by 17,000
internal Professional Subscribers.
\25\ The hypothetical per-Subscriber monthly charge for the
Proposal is estimated as the flat fee of $155,000 divided by 17,000
internal Professional Subscribers.
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In addition, a number of the mid-size broker-dealers that currently
have too few professional subscribers to benefit from the license would
be able to achieve substantial savings at the new, lower rate. The
``break even'' point--i.e., the point at which the average per-
Subscriber rate of a licensee falls below the per-Subscriber rate of
$26--is currently 14,038 internal Professional Subscribers.\26\ Under
the new fee schedule, broker-dealers with as few as 5,962 internal
Professional Subscribers would be able to save money.\27\ A
hypothetical broker-dealer with 10,000 internal Professional
Subscribers would
[[Page 81240]]
be able to save $105,000 per month,\28\ reducing per-Subscriber fees
from $26 \29\ to $15.50.\30\
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\26\ See Securities Exchange Act Release No. 71507 (February 7,
2014), 79 FR 8763 (February 13, 2014) (SR-NASDAQ-2014-011)
(explaining that the $365,000 monthly fee for all internal
subscribers, divided by $26 monthly fee for each internal
Subscriber, is equal to 14,038).
\27\ This estimated cutoff point is calculated as the Proposed
license fee of $155,000 divided by the per-Subscriber rate of $26
per month.
\28\ Savings are calculated as follows: 10,000 internal
Professional Subscribers multiplied by $26 per-Subscriber equals
$260,000. The difference between $260,000 and $155,000 is $105,000.
\29\ See Equity 7 Pricing Schedule, Section 147(b)(1).
\30\ This figure is calculated as the proposed flat fee of
$155,000 divided by 10,000 internal Professional Subscribers.
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In addition to lowering Nasdaq's fees, the proposed rule change
will allow users to lower internal administrative costs by eliminating
the need to report monthly usage. Nasdaq does not have sufficient
information about broker-dealer operations and costs to accurately
estimate these savings, but believes that monthly savings in
administrative expenditures--as well as the improved ability to project
future expenditures achieved by eliminating audit liability for errors
in reporting usage--to be substantial.
Staff of the Commission's Division of Trading and Markets have
indicated that self-regulatory organizations (``SROs'') proposing fee
changes should provide ``the projected number of purchasers (including
members, as well as non-members) of any new or modified product or
service . . . .'' \31\ Prior to the proposed change, two customers had
purchased the Nasdaq Basic Professional Subscriber enterprise license
for $365,000, plus $2 for any Professional Subscriber over 16,000 if an
external Distributor controls the display of the product.\32\ Of these
two customers, one informed Nasdaq that it would abandon the Nasdaq
license in favor of a license offered by one of its two major
competitors, Cboe and NYSE. After the proposed license fee was
instituted on October 1, 2020, the complaining customer decided to
retain the license. Nasdaq is also in discussions with additional
customers to purchase the license, including both customers that do not
currently purchase Nasdaq Basic, and customers that do purchase Nasdaq
Basic, but not through an enterprise license. To date, however, no new
firms have purchased the enterprise license.
---------------------------------------------------------------------------
\31\ See Division of Trading and Markets, U.S. Securities and
Exchange Commission, ``Staff Guidance on SRO Filings Related to Fees
(May 21, 2019), available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees.
\32\ No customers purchased the comparable license for NLS,
discussed above.
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While any broker-dealer with approximately 5,962 or more internal
Subscribers will be able to benefit from the proposed license, Nasdaq
does not know, and is unable to ascertain with precision, the number of
internal Professional Subscribers utilized by various broker-dealers,
nor can it anticipate the actions of its competitors in response to the
lower enterprise license fee, and therefore cannot project precisely
the number of expected purchasers. Nevertheless, judging from
expressions of interest and Nasdaq's experience in the financial
services industry, Nasdaq estimates that between fifteen and twenty
broker-dealers worldwide may elect to purchase the license.\33\
---------------------------------------------------------------------------
\33\ This estimate is based on customer conversations and the
experience and judgment of Nasdaq staff.
---------------------------------------------------------------------------
2. Statutory Basis
The Exchange believes that its Proposal is consistent with Section
6(b) of the Act,\34\ in general, and furthers the objectives of
Sections 6(b)(4) and 6(b)(5) of the Act,\35\ in particular, in that it
provides for the equitable allocation of reasonable dues, fees and
other charges among members and issuers and other persons using any
facility, and is not designed to permit unfair discrimination between
customers, issuers, brokers, or dealers.
---------------------------------------------------------------------------
\34\ See 15 U.S.C. 78f(b).
\35\ See 15 U.S.C. 78f(b)(4) and (5).
---------------------------------------------------------------------------
As a preliminary manner, the statutory basis for the current Nasdaq
Basic and NLS enterprise licenses have already been explained in prior
filings.\36\ The Proposal lowers fees for enterprise licenses that have
already been shown to be consistent with Section 6(b) of the Act, and
this analysis therefore focuses on the new, lower fees.\37\
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\36\ See, e.g., Securities Exchange Act Release No. 81697
(September 25, 2017), 82 FR 45639 (September 29, 2017) (SR-NASDAQ-
2017-095); Securities Exchange Act Release No. 72620 (July 16,
2014), 79 FR 42572 (July 22, 2014) (SR-NASDAQ-2014-070); Securities
Exchange Act Release No. 72153 (May 12, 2014), 79 FR 28575 (May 16,
2014) (SR-NASDAQ-2014-045); Securities Exchange Act Release No.
71507 (February 7, 2014), 79 FR 8763 (February 13, 2014) (SR-NASDAQ-
2014-011); see Securities Exchange Act Release No. 82723 (February
15, 2018), 83 FR 7812 (February 22, 2018) (SR-Nasdaq-2018-010).
\37\ The statutory bases for both the Nasdaq Basic and NLS
enterprise licenses are identical. Both are top-of-book products
sold to broker-dealers for internal distribution to Professionals.
The fee structure and use requirements are currently the same for
both, and will continue to be the same under the Proposal. The
discussion contained herein therefore applies to both licenses.
---------------------------------------------------------------------------
The Proposal Is an Equitable Allocation of Reasonable Dues, Fees and
Other Charges
As the Commission and courts \38\ have recognized, ``[i]f
competitive forces are operative, the self-interest of the exchanges
themselves will work powerfully to constrain unreasonable or unfair
behavior.'' \39\ Accordingly, ``the existence of significant
competition provides a substantial basis for finding that the terms of
an exchange's fee proposal are equitable, fair, reasonable, and not
unreasonably or unfairly discriminatory.'' \40\ Nasdaq believes that
competitive forces constrain the price of top-of-book products based on
competition among exchanges for top-of-book data. The proposed fee
change is a direct response to this competition.
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\38\ The decision of the United States Court of Appeals for the
District of Columbia Circuit in NetCoalition v. SEC, 615 F.3d 525
(D.C. Cir. 2010) upheld the Commission's reliance upon competitive
markets to set reasonable and equitably allocated fees for 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.''
NetCoalition I, at 535 (quoting H.R. Rep. No. 94-229, at 92 (1975),
as reprinted in 1975 U.S.C.C.A.N. 321, 323) (internal quotation
marks omitted). 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.'' Id. (quoting Securities
Exchange Act Release No. 59039 (December 2, 2008), 73 FR 74770,
74,771 (December 9, 2008) (SR-NYSEArca-2006-21)).
\39\ See Securities Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21).
\40\ Id.
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Nasdaq Basic and NLS provide choices to broker-dealers and other
data consumers by providing less than the quantum of data provided
through the consolidated tape feeds, but at a lower price. The same is
true for the top-of-book proprietary products offered by other
exchanges. All of these top-of-book products are substitutes for each
other. Nasdaq Basic provides data derived from liquidity within the
Nasdaq market center and trades reported to the FINRA/Nasdaq TRF. The
NYSE BQT feed disseminates top-of-book information from the NYSE, NYSE
American, NYSE Arca and NYSE National exchanges.\41\ The Cboe One
Summary Feed provides data from the four Cboe equities exchanges: BZX
Exchange, BYX Exchange, EDGX Exchange and EDGA Exchange.\42\ These
exchanges compete on price and quality
[[Page 81241]]
for their top-of-book feeds. NYSE \43\ and Cboe,\44\ like Nasdaq, offer
enterprise licenses. Cboe touts its price in promotional
literature,\45\ and reduced its fee for certain top-of-book customers
just this year.\46\
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\41\ See https://www.nyse.com/market-data/real-time/nyse-bqt.
\42\ See https://markets.cboe.com/us/equities/
market_data_services/
#:~:text=Cboe%20Top%20is%20a%20real,time%20on%20a%20Cboe%20book.&text
=It%20is%20a%20real%2Dtime,time%20on%20a%20Cboe%20book We note that
Cboe recently proposed a fee reduction for top-of-book data as well.
See Securities Exchange Act Release No. 86670 (August 14, 2019), 84
FR 43207 (August 20, 2019) (SR-CboeBYX-2019-012).
\43\ See https://www.nyse.com/market-data/real-time/nyse-bqt.
\44\ See https://markets.cboe.com/us/equities/market_data_services/cboe_one/.
\45\ See https://markets.cboe.com/us/equities/
market_data_services/
#:~:text=Cboe%20Top%20is%20a%20real,time%20on%20a%20Cboe%20book.&text
=It%20is%20a%20real%2Dtime,time%20on%20a%20Cboe%20book (``The Cboe
One Feed is 60% less expensive per professional user and more than
85% less expensive for an enterprise license for professional users
and non-professional users when compared to a similar competitor
exchange product.'').
\46\ See Securities Exchange Act Release No. 88221 (February 14,
2020), 85 FR 9904 (February 20, 2020) (SR-CboeBYX-2020-007) (stating
that ``the Exchange's top of book market data products are among the
most competitively priced in the industry due to modest subscriber
fees, and a lower Enterprise cap . . . .''). The filing included a
table comparing its pricing to Nasdaq Basic.
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Top-of-book data can be used for many purposes--from a retail
investor casually surveying the market to sophisticated market
participants using it for a variety of applications, such as investment
analysis, risk management, or portfolio valuation. The value of that
data depends on its quality and how well it approximates the NBBO,
which is determined by the amount of order flow attracted by the
exchange--the more order flow, the more quotes and trades, and the
better the exchange data will be able to match the NBBO.
Nasdaq's own experience with sales of top-of-book feeds underscores
their substitutability, as the customer whose feedback motivated this
price change informed Nasdaq that it would drop Nasdaq Basic in favor
of a competing product unless a change is made.
The constraint imposed by direct competition on the price of top-
of-book data is further illustrated by proposals to reduce fees for
three of the four top-of-book enterprise licenses in the past several
years: (i) The enterprise license for external distribution of Nasdaq
Basic; \47\ (ii) the enterprise license for the external distribution
of NLS; \48\ and (iii) the combined enterprise license for distribution
of top-of-book and depth-of-book data.\49\ Nasdaq is not alone in
lowering fees to compete against the other exchanges. Just this year,
Cboe proposed a fee reduction for its top-of-book data.\50\
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\47\ See Securities Exchange Act Release No. 79456 (December 2,
2016), 81 FR 88716 (December 8, 2016) (SR-NASDAQ-2016-162).
\48\ See Securities Exchange Act Release No. 77578 (April 11,
2016), 81 FR 22344 (April 15, 2016) (SR-NASDAQ-2016-048).
\49\ See Securities Exchange Act Release No. 83751 (July 31,
2018), 83 FR 38428 (August 6, 2018) (SR-Nasdaq-2018-058).
\50\ See Securities Exchange Act Release No. 86670 (August 14,
2019), 84 FR 43207 (August 20, 2019) (SR-CboeBYX-2019-012).
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As shown, Nasdaq competes against other exchanges in the sale of
top-of-book products. That competition constrains the price of top-of-
book market data, and provides a substantial basis for finding that the
terms of an exchange's fee proposal are equitable, fair, reasonable,
and not unreasonably or unfairly discriminatory.
The Proposal Does Not Permit Unfair Discrimination
The Proposal is not unfairly discriminatory. As previously noted,
the Nasdaq Basic enterprise license subject to this Proposal was shown
to be non-discriminatory and otherwise consistent with the Act over six
years ago.\51\ The only difference between that initial proposal and
the change under consideration today is that the new license costs less
and more broker-dealers will be able to benefit from the lower prices.
Enterprise licenses in general have been widely recognized as an
effective and not unfairly discriminatory method of distributing market
data. This applies to Nasdaq's enterprise licenses as well as those
offered by the NYSE and Cboe exchanges.\52\
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\51\ See Securities Exchange Act Release No. 71507 (February 7,
2014), 79 FR 8763 (February 13, 2014) (SR-NASDAQ-2014-011)
(initially adopting the current enterprise license).
\52\ See, e.g., Sections 123(c) and 147 (b); Securities Exchange
Act Release No. 82182 (November 30, 2017), 82 FR 57627 (December 6,
2017) (SR-NYSE-2017-60) (changing an enterprise fee for NYSE BBO and
NYSE Trades).
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The Act does not prohibit all distinctions among customers; only
discrimination that is unfair. It is not unfair discrimination to
charge those Distributors that are able to reach the largest audiences
of retail investors a lower fee for incremental investors in order to
encourage the widespread distribution of market data.
The instant Proposal, like other enterprise licenses, will cause
top-of-book data to become more widely available to investors. It will
save current enterprise license purchasers the $210,000 per month
difference between the current base fee of $365,000 and $155,000, plus
$2 times the number of internal Professional Subscribers over 16,000.
Broker-dealers that do not currently purchase the license will
nevertheless benefit because the ``break even'' point--i.e., the point
where the average per-Subscriber rate of a licensee falls below per-
Subscriber rate of $26--will fall from 14,038 to 5,962 internal
Professional Subscribers.\53\ All purchasers of the proposed license
will also be able to save in administrative expenditures by eliminating
monthly reporting requirements and periodic review of such reports by
compliance staff.
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\53\ See Securities Exchange Act Release No. 71507 (February 7,
2014), 79 FR 8763 (February 13, 2014) (SR-NASDAQ-2014-011)
(explaining that the $365,000 monthly fee for all internal
subscribers, divided by $26 monthly fee for each internal
Subscriber, is equal to 14,038).
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It is of particular importance now to expand the availability of
top-of-book data. In recent months, retail investors have become
increasingly interested in equities markets. Many of these retail
investors will require advice and assistance from equity market
professionals, and this license will enable broker-dealers that serve
such clients to do so at a lower cost.
In addition, the proposed enterprise license will be subject to
significant competition, and that competition will ensure that there is
no unfair discrimination. Each Distributor will be able to accept or
reject the license depending on whether it will or will not lower costs
for that particular Distributor, and, if the license is not
sufficiently competitive, the Exchange may lose market share.
For all of these reasons, the Proposal is not unreasonably
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 not necessary or appropriate in
furtherance of the purposes of the Act. With respect to inter-market
competition--the competition among SROs--the Exchange's ability to
price market data products is constrained by competition among
exchanges for top-of-book data. With respect to intra-market
competition--the competition among consumers of exchange data--the
Exchange expects the Proposal to promote competition through lower-cost
data.
Intermarket Competition
As discussed in detail under Statutory Basis, Nasdaq competes with
other exchanges in the sale of top-of-book products. In order to better
compete for this segment of the market, the Exchange is proposing to
reduce the cost of top-of-book data by lowering the enterprise license
fee for internal Professional Subscribers. The proposed price reduction
will not cause any unnecessary or inappropriate burden on intermarket
competition, as other
[[Page 81242]]
exchanges and data vendors are free to lower their prices to better
compete with the Exchange's offering. Nasdaq's main competitors, in
particular, offer directly competing enterprise licenses for their top-
of-book products, and are readily able to lower enterprise license fees
in response to Nasdaq. Indeed, the Exchange's decision to lower its
enterprise license fee was itself generated by the need to compete with
other exchanges. The Proposal may in turn generate competitive
responses from other exchanges, enhancing overall competition.
Intramarket Competition
The Proposal will not cause any unnecessary or inappropriate burden
on intramarket competition. In fact, it will foster competition among
broker-dealers by lowering costs for current licensees, while at the
same time increasing the number of broker-dealers able to purchase that
license. The current enterprise license, just like all of the
enterprise licenses offered by Nasdaq's competitors, does not itself
impose an unnecessary or inappropriate burden on intramarket
competition. Relatively smaller broker-dealers have fewer internal
Professional Subscribers and therefore operate with lower fixed costs,
helping them compete with the larger broker-dealers. Moreover, the
underlying fee of $26 per Professional Subscriber fee has itself been
shown not to place an undue burden on competition, and, if that fee
proves to be excessive, broker-dealers would be able to purchase top-
of-book data from one of the Exchange's competitors offering a
substitute product. For all of these reasons, the Proposal will not
place any unnecessary or inappropriate burden on intramarket
competition.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
No written comments were either solicited or received.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
The foregoing rule change has become effective pursuant to Section
19(b)(3)(A)(ii) of the Act.\54\
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\54\ 15 U.S.C. 78s(b)(3)(A)(ii).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend such rule
change if it appears to the Commission that such action is: (i)
Necessary or appropriate in the public interest; (ii) for the
protection of investors; or (iii) otherwise in furtherance of the
purposes of the Act. If the Commission takes such action, the
Commission shall institute proceedings to determine whether the
proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
File Number SR-NASDAQ-2020-086 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-NASDAQ-2020-086. 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-NASDAQ-2020-086 and should be submitted
on or before January 5, 2021.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\55\
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\55\ 17 CFR 200.30-3(a)(12).
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J. Matthew DeLesDernier,
Assistant Secretary.
[FR Doc. 2020-27484 Filed 12-14-20; 8:45 am]
BILLING CODE 8011-01-P
