Joint Industry Plan; Order Instituting Proceedings To Determine Whether To Approve or Disapprove the Fifty-Second Amendment to the Joint Self-Regulatory Organization Plan Governing the Collection, Consolidation and Dissemination of Quotation and Transaction Information for Nasdaq-Listed Securities Traded on Exchanges on an Unlisted Trading Privileges Basis, 11787-11800 [2022-04332]
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Federal Register / Vol. 87, No. 41 / Wednesday, March 2, 2022 / Notices
persons of an ActiveShares ETF to
deposit securities into, and receive
securities from, the ActiveShares ETF in
connection with the purchase and
redemption of creation units. The relief
in the Order would incorporate by
reference terms and conditions of the
same relief of a previous order granting
the same relief sought by applicants, as
that order may be amended from time to
time (‘‘Reference Order’’).1
APPLICANTS: Northern Lights Fund
Trust IV, First Manhattan Co. and
Northern Lights Distributors, LLC.
FILING DATES: The application was filed
on November 10, 2021, and amended on
February 4, 2022.
HEARING OR NOTIFICATION OF HEARING:
An order granting the requested relief
will be issued unless the Commission
orders a hearing. Interested persons may
request a hearing on any application by
emailing the Commission’s Secretary at
Secretarys-Office@sec.gov and serving
applicants with a copy of the request by
email, if an email address is listed for
the relevant applicant below, or
personally or by mail, if a physical
address is listed for the relevant
applicant below. Hearing requests
should be received by the Commission
by 5:30 p.m. on March 21, 2022, and
should be accompanied by proof of
service on applicants, in the form of an
affidavit or, for lawyers, a certificate of
service. Pursuant to rule 0–5 under the
Act, hearing requests should state the
nature of the writer’s interest, any facts
bearing upon the desirability of a
hearing on the matter, the reason for the
request, and the issues contested.
Persons who wish to be notified of a
hearing may request notification by
emailing the Commission’s Secretary.
ADDRESSES: The Commission:
Secretarys-Office@sec.gov. Applicants:
Wendy Wang, Northern Lights Fund
Trust IV, wwang@
ultimusfundsolutions.com; Benjamin
Clammer, First Manhattan Co.,
bclammer@firstmanhattan.com; Kevin
Guerette, Northern Lights Distributors,
LLC, kguerette@
ultimusfundsolutions.com; JoAnn M.
Strasser, Esq. and Bibb L. Strench, Esq.,
Thompson Hine LLP, JoAnn.Strasser@
ThompsonHine.com, Bibb.Strench@
ThompsonHine.com.
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FOR FURTHER INFORMATION CONTACT:
Deepak T. Pai, Senior Counsel, or Trace
W. Rakestraw, Branch Chief, at (202)
551–6825 (Division of Investment
Management, Chief Counsel’s Office).
1 Precidian ETFs Trust, et al., Investment
Company Act Rel. Nos. 33440 (April 8, 2019)
(notice) and 33477 (May 20, 2019) (order).
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17:34 Mar 01, 2022
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For
applicants’ representations, legal
analysis, and conditions, please refer to
applicants’ amended application, dated
February 4, 2022, which may be
obtained via the Commission’s website
by searching for the file number at the
top of this document, or for an
Applicant using the Company name
search field, on the SEC’s EDGAR
system. The SEC’s EDGAR system may
be searched at https://www.sec.gov/
edgar/searchedgar/legacy/
companysearch.html. You may also call
the SEC’s Public Reference Room at
(202) 551–8090.
SUPPLEMENTARY INFORMATION:
For the Commission, by the Division of
Investment Management, under delegated
authority.
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2022–04312 Filed 3–1–22; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–94307; File No. S7–24–89]
Joint Industry Plan; Order Instituting
Proceedings To Determine Whether To
Approve or Disapprove the FiftySecond Amendment to the Joint SelfRegulatory Organization Plan
Governing the Collection,
Consolidation and Dissemination of
Quotation and Transaction Information
for Nasdaq-Listed Securities Traded on
Exchanges on an Unlisted Trading
Privileges Basis
1 See Letter from Robert Books, Chair, UTP
Operating Committee, to Vanessa Countryman,
Secretary, Commission (Nov. 5, 2021) (‘‘Cover
Letter’’).
2 The Plan governs the collection, processing, and
dissemination on a consolidated basis of quotation
information and transaction reports in Eligible
Securities for its Participants. The Plan serves as the
required transaction reporting plan for its
Participants, which is a prerequisite for their
trading Eligible Securities. See Securities Exchange
Act Release No. 55647 (Apr. 19, 2007), 72 FR 20891
(Apr. 26, 2007).
Frm 00102
Fmt 4703
II. Summary of the Proposed
Amendment 8
Under the Proposed Amendment, the
Participants propose to amend the Plan
to adopt fees for the receipt of the
expanded content of consolidated
market data pursuant to the
Commission’s Market Data
Infrastructure Rule (‘‘MDI Rule’’).9 The
Participants have submitted a separate
amendment to implement the non-feerelated aspects of the MDI Rule.10
The Participants propose a fee
structure for the following three
categories of consolidated equity market
data, which collectively constitute the
amended definition of core data, as that
term is defined in amended Rule
600(b)(21) of Regulation NMS: 11
(1) Level 1 Service, which would
include Top of Book Quotations, Last
Sale Price Information, and odd-lot
U.S.C 78k–1.
CFR 242.608.
5 The Proposed Amendment was approved and
executed by more than the Plan’s required twothirds of the self-regulatory organizations (‘‘SROs’’)
that are participants of the UTP Plan. The
participants that approved and executed the
amendment (the ‘‘Participants’’) are: Cboe BYX
Exchange, Inc., Cboe BZX Exchange, Inc., Cboe
EDGA Exchange, Inc., Cboe EDGX Exchange, Inc.,
Cboe Exchange, Inc., Nasdaq ISE, LLC, Nasdaq
PHLX, Inc., The Nasdaq Stock Market LLC, New
York Stock Exchange LLC, NYSE American LLC,
NYSE Arca, Inc., NYSE Chicago, Inc., and NYSE
National, Inc.. The other SROs that are participants
in the UTP Plan are: Financial Industry Regulatory
Authority, Inc., The Investors’ Exchange LLC, LongTerm Stock Exchange, Inc., MEMX LLC, MIAX
PEARL, LLC, and Nasdaq BX, Inc.
6 See Securities Exchange Act Release No. 93618
(Nov. 19, 2021), 86 FR 67562 (Nov. 26, 2021)
(‘‘Notice’’). Comments received in response to the
Notice are available at https://www.sec.gov/
comments/s7-24-89/s72489.shtml.
7 17 CFR 242.608(b)(2)(i).
8 The full text of the Proposed Amendment
appears as Attachment A to the Notice. See Notice,
supra note 6, 86 FR 67566–68.
9 See Securities Exchange Act Release No. 90610,
86 FR 18596 (April 9, 2021) (File No. S7–03–20)
(‘‘MDI Rule Release’’).
10 See Securities Exchange Act Release No. 93620
(Nov. 19, 2021), 86 FR 67541 (Nov. 26, 2021).
11 17 CFR 242.600(b)(26).
4 17
I. Introduction
On November 5, 2021,1 certain
participants in the Joint Self-Regulatory
Organization Plan Governing the
Collection, Consolidation and
Dissemination of Quotation and
Transaction Information for NasdaqListed Securities Traded on Exchanges
on an Unlisted Trading Privileges Basis
(‘‘Nasdaq/UTP Plan’’ or ‘‘Plan’’) 2 filed
with the Securities and Exchange
Commission (‘‘SEC’’ or ‘‘Commission’’),
pursuant to Section 11A of the
Securities Exchange Act of 1934
PO 00000
(‘‘Act’’) 3 and Rule 608 of Regulation
National Market System (‘‘NMS’’)
thereunder,4 a proposal (the ‘‘Proposed
Amendment’’) to amend the Nasdaq/
UTP Plan.5 The Proposed Amendment
was published for comment in the
Federal Register on November 26,
2021.6
This order institutes proceedings,
under Rule 608(b)(2)(i) of Regulation
NMS,7 to determine whether to approve
or disapprove the Proposed Amendment
or to approve the Proposed Amendment
with any changes or subject to any
conditions the Commission deems
necessary or appropriate after
considering public comment.
3 15
February 24, 2022.
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Federal Register / Vol. 87, No. 41 / Wednesday, March 2, 2022 / Notices
information (as defined in amended
Rule 600(b)(59)). Plan fees to subscribers
currently are for Top of Book Quotations
and Last Sale Price Information, as well
as what is now defined as
administrative data (as defined in
amended Rule 600(b)(2)), regulatory
data (as defined in amended Rule
600(b)(78)), and self-regulatory
organization-specific program data (as
defined in amended Rule 600(b)(85)).
The Participants propose that the fees
for Level 1 Service would remain
unchanged and that Level 1 Service
would continue to include all
information that subscribers currently
receive and would add odd-lot
information;
(2) Depth of book data (as defined in
amended Rule 600(b)(26)); and
(3) Auction information (as defined in
amended Rule 600(b)(5)).12
Professional and Nonprofessional Fee
Structure
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12 The Participants state that they propose to price
subsets of data that constitute core data separately
so that data subscriber users have flexibility in how
much consolidated market data content they wish
to purchase. For example, the Participants state that
they understand that certain data subscribers may
not wish to add depth-of-book data or auction
information, or may want to add only depth-of-book
information, but not auction information.
Accordingly, Participants are proposing to price
subsets of data to provide flexibility to data
subscribers. However, the Participants state that
they expect that competing consolidators would
purchase all core data.
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The Participants propose Non-Display
Use Fees relating to the three categories
of data described above: (1) Level 1
Service; (2) depth-of-book data; and (3)
auction information.
With respect to Level 1 Service, the
Participants do not propose to change
the Non-Display Use fees currently set
forth in the UTP Plan. Access to odd-lot
information would be made available to
Level 1 Service subscribers at no
additional charge.
With respect to non-display use of
depth-of-book data, subscribers would
pay Non-Display Use Fees of $12,477.00
per month for each category of NonDisplay Use.
With respect to non-display auction
information, subscribers would pay
Non-Display Use fees of $1,248.00 per
month for each category of Non-Display
Use.
Access Fees
For each of the three categories of data
described above, the Participants
propose a Professional Subscriber
Charge and a Nonprofessional
Subscriber Charge.
With respect to Level 1 Service, the
Participants do not propose to change
the Professional Subscriber and
Nonprofessional Subscriber fees
currently set forth in the UTP Plan.
Access to odd-lot information would be
made available to Level 1 Service
Professional and Nonprofessional
Subscribers at no additional charge.
With respect to depth-of-book data,
Professional Subscribers would pay
$99.00 per device per month, and
Nonprofessional Subscribers would pay
$4.00 per subscriber per device per
month. The Participants do not propose
at this time to offer per-quote packet
charges or enterprise rates for the use of
depth-of-book data by either
Professional Subscribers or
Nonprofessional Subscribers.
Finally, with respect to auction
information, both Professional
Subscribers and Nonprofessional
Subscribers would pay $10.00 per
device per month.
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Non-Display Use Fees
Finally, in addition to the charges
described above, the Participants
propose to charge Access Fees to all
subscribers for the use of the three
categories of data: (1) Level 1 Service;
(2) depth-of-book data; and (3) auction
information.
With respect to Level 1 Service, the
Participants do not propose to change
the Access Fees currently set forth in
the UTP Plan. Access to odd-lot
information would be made available to
Level 1 Service subscribers at no
additional charge.
With respect to depth-of-book data,
subscribers would pay a monthly
Access Fee of $9,850.00.
With respect to auction information,
subscribers would pay a monthly
Access Fee of $985.00 per Network.
Clarifications Related to Expanded
Content
The Participants also propose to add
clarifying language to the fees for UTP
services regarding the applicability of
various fees to the expanded market
data content required by the MDI Rule.
First, the Participants propose to
clarify that the Per Query Fee will not
apply to the expanded content, and will
only be available for the receipt and use
of Level 1 Service. The Participants state
that, under the current Price List, the
Per Query Fee serves as an alternative
fee schedule to the normally applied
Professional and Nonprofessional
Subscriber Charges, and, further, that
the proposed changes are designed to
clarify that Per Query Fee is only
available with respect to the use of
Level 1 Service, and that the fees for the
use of depth-of-book data and auction
PO 00000
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information must be determined
pursuant to the Professional and
Nonprofessional fees described above.
Second, the Participants propose to
clarify that Level 1 Service would
include Top of Book Quotation
Information, Last Sale Price
Information, odd-lot information,
administrative data, regulatory data, and
self-regulatory organization program
data. The Participants state that this
proposed amendment would use terms
defined in amended Rule 600(b) to
reflect both current data made available
to data subscribers and the additional
odd-lot information that would be
included at no additional charge.
Third, the Participants propose to
clarify that the existing Redistribution
Fees would apply to all three categories
of core data (i.e., Level 1, depth-of-book,
and auction information), including any
subset thereof. According to the
Participants, Redistribution Fees are
currently charged to any entity that
makes last sale information or quotation
information available to any other entity
or to any person other than its
employees, irrespective of the means of
transmission or access. The Participants
propose to amend this description to
make it applicable to core data, as that
term is defined in amended Rule
600(b)(21). The Participants do not
propose to change the amount of the
Redistribution Fees themselves.
Fourth, the Participants propose that
the existing Redistribution Fees would
be charged to competing consolidators.
The Participants argue (1) that the
comparison the Commission made in
the MDI Rule Release between selfaggregators (which would not pay
Redistribution Fees) and competing
consolidators is not appropriate in
determining whether a redistribution fee
is not unreasonably discriminatory; and
(2) that the Participants do not believe
that the Commission’s comparison is
consistent with the current longstanding practice that redistribution fees
are charged to any entity that distributes
data externally.13 The Participants state
13 The Participants state that the current exclusive
securities information processor (‘‘SIP’’) is not
charged a Redistribution Fee. The Participants state,
however, that unlike competing consolidators, the
processor has been retained by the UTP Plan to
serve as an exclusive SIP, is subject to oversight by
both the UTP Plan and the Commission, and neither
pays for the data nor engages with data subscriber
customers. The Participants state that, by contrast,
under the competing consolidator model, the UTP
Plan would have no role in either oversight of or
determining which entities choose to be a
competing consolidator, a competing consolidator
would need to purchase consolidated market data
just as any other vendor would, and competing
consolidators would be responsible for competing
for data subscriber clients. Accordingly, the
Participants argue that competing consolidators
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that a self-aggregator, by definition,
would not be distributing data
externally and therefore would not be
subject to such fees, which, according to
the Participants, is consistent with
current practice that a subscriber to
consolidated data that only uses data for
internal use is not charged a
Redistribution Fee.
The Participants state that the more
appropriate comparison would be
between competing consolidators and
downstream vendors, both of which
would be selling consolidated market
data directly to market data subscribers.
The Participants state that vendors are
and still would be subject to
Redistribution Fees when redistributing
data to market data subscribers, and that
it would be unreasonably
discriminatory for competing
consolidators—which would be
competing with downstream market
data vendors for the same data
subscriber customers—to not be charged
a Redistribution Fee for exactly the
same activity. The Participants argue
that, consequently, it would be
unreasonably discriminatory and would
impose a burden on competition to not
charge competing consolidators the
Redistribution Fee.14
Third, the Participants state that the
UTP Plan fee schedule currently permits
the redistribution of UTP Level 1
Service on a delayed basis for $250.00
per month. The Participants propose
adding a statement that depth-of-book
data and auction information may not
be redistributed on a delayed basis.
Finally, the Participants propose to
make non-substantive changes to
language in the fee schedules to take
into account the expanded content. For
example, the Participants propose
updating various fee descriptions to
either add or remove a reference to UTP
Level 1 Service. Additionally, the
Participants state that, while FINRA
OTC Data will not be provided to
competing consolidators, it is still being
provided to the UTP Processor for
inclusion in the consolidated market
would be more akin to vendors than the current
exclusive SIPs. The Participants state that if any
entity that is currently an exclusive SIP chooses to
register as a competing consolidator, such entity
would be subject to the Redistribution Fee.
14 The Participants argue that it would be more
appropriate to compare competing consolidators
and self-aggregators with respect to the fees charged
for receipt and use of market data from the
Participants and to address the fees for the usage
of consolidated market data based on their actual
usage, which, the Participants argue, is consistent
with the statutory requirements of the Act that the
data be provided on terms that are not unreasonably
discriminatory. The Participants state that, for
instance, Participants have proposed to charge a
data access fee to competing consolidators that
would be the same fee to self-aggregators.
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17:34 Mar 01, 2022
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data made available by the UTP
Processor. Accordingly, the Participants
propose adding clarifying language to
make clear that UTP Level 1 Service
obtained from the Processor will
include FINRA OTC Data but will not
include odd-lot information.
III. Summary of Comments
The Commission has received 16
comment letters on the Proposed
Amendment.15 Fourteen commenters
object to the Proposed Amendment,16
and two commenters support the
Proposed Amendment.17
A. Comments Regarding the
Methodology Used To Justify the
Proposed Fees
Some commenters oppose the
Proposed Amendment, arguing that the
proposed fees are based on a flawed
15 See Letters to Vanessa Countryman, Secretary,
Commission from Hope M. Jarkowski, General
Counsel, NYSE Group, Inc. (Jan. 22, 2022) (‘‘NYSE
Letter’’); Christopher Solgan, Senior Counsel, MIAX
Exchange Group (Jan.12, 2022) (‘‘MIAX Letter’’);
Emil Framnes and Simon Emrich, Norges Bank
Investment Management (Jan. 5, 2022) (‘‘NBIM
Letter’’); James Angel, Ph.D., CFP, CFA, Associate
Professor of Finance, Georgetown University (Dec.
21, 2021) (‘‘Angel Letter’’); Luc Burgun, President
and CEO, NovaSparks S.A.S. (Dec. 17, 2021)
(‘‘NovaSparks Letter’’); Joe Wald, Managing
Director, Co-Head of Electronic Trading, BMO
Capital Markets Group, BMO Capital Markets and
Ray Ross, Managing Director, Co-Head of Electronic
Trading, BMO Capital Markets Group (Dec. 17,
2021) (‘‘BMO Letter’’); Erika Moore, Vice President
and Corporate Secretary, Nasdaq Stock Market LLC
(Dec. 17, 2021) (‘‘Nasdaq Letter’’); John Ramsay,
Chief Market Policy Officer, Investors Exchange
LLC (Dec. 17, 2021) (‘‘IEX Letter’’); Ellen Greene,
Managing Director, Equity & Options Market
Structure, Securities Industry and Financial
Markets Association and William C. Thum,
Managing Director and Associate General Counsel,
Asset Management Group, Securities Industry and
Financial Markets Association (Dec. 17, 2021)
(‘‘SIFMA Letter’’); Marcia E. Asquith, Executive
Vice President, Board and External Relations,
Financial Industry Regulatory Authority, Inc. (Dec.
17, 2021) (‘‘FINRA Letter’’); Patrick Flannery, Chief
Executive Officer, MayStreet (Dec. 17, 2021)
(‘‘MayStreet Letter’’); Hubert De Jesus, Managing
Director, Global Head of Market Structure and
Electronic Trading, BlackRock and Samantha
DeZur, Director, Global Public Policy, BlackRock
(Dec. 16, 2021) (‘‘BlackRock Letter’’); Jonathan Hill,
CEO, Cutler Group, LP Anand Prakash, CTO, Cutler
Group, LP Nader Sharabati, CFO, Cutler Group, LP
and Doug Patterson, CCO, Cutler Group, LP (Dec.
16, 2021) (‘‘Cutler Letter’’); Quinton Pike, CEO,
Polygon.io, Inc. (Nov. 30, 2021) (‘‘Polygon.io
Letter’’); Allison Bishop, President, Proof Services
LLC (Nov. 22, 2021) (‘‘Proof Letter’’); Adrian
Griffiths, Head of Market Structure, MEMX LLC,
(Nov. 8, 2021) (‘‘MEMX Letter’’).
16 See MIAX Letter, supra note 15; NBIM Letter,
supra note 15; Angel Letter, supra note 15;
NovaSparks Letter, supra note 15; BMO Capital
Letter, supra note 15; IEX Letter, supra note 15;
SIFMA Letter, supra note 15; FINRA Letter, supra
note 15; MayStreet Letter, supra note 15; BlackRock
Letter, supra note 15; Cutler Letter, supra note 15;
Polygon.io Letter, supra note 15; Proof Letter, supra
note 15; MEMX Letter, supra note 15.
17 See Nasdaq Letter, supra note 15; NYSE Letter,
supra note 15.
PO 00000
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11789
methodology that, inconsistent with the
MDI Rule Release, fails to provide a
cost-based justification.18 These
commenters state that the proposal
should bear a reasonable relationship to
the cost of producing the market data,
which, they argue, is the primary basis
the Commission has identified for
justifying the prices for core data fees.19
Some commenters also state that the
methodology used has resulted in
proposed fees that are unreasonably
high.20 In making this argument, some
commenters object to using the current
prices for the exchanges’ proprietary
data products as the basis for calculating
the proposed core data fees,21 stating
that such a method is inconsistent with
the MDI Rule’s goal of expanding access
to consolidated data 22 and with
statements in the MDI Rule Release that
the proposed fees should bear a
reasonable relationship to the cost of
producing the data.23
Some commenters also state that they
disagree with the Participants’ views in
the proposal that a cost-based
justification is not required because the
Act does not require a showing of costs
and that cost analysis has not been
provided in past equity market data
plan proposals.24 These commenters
state that the Commission has stated
that a reasonable relation to cost is a
18 See MIAX Letter, supra note 15, at 3; IEX
Letter, supra note 15, at 2–3. See also BMO Letter,
supra note 15, at 2–3; SIFMA Letter, supra note 15,
at 4–5 (noting that the fees charged by monopolistic
providers, such as exclusive SIPs, to be tied to some
type of cost-based standard in order to preclude
excessive profits if fees are too high or
underfunding or subsidization if fees are too low);
MayStreet Letter, supra note 15, at 6; BlackRock
Letter, supra note 15, at 2; Proof Letter, supra note
15, at 2, 3; MEMX Letter, supra note 15, at 18.
19 See IEX Letter, supra note 15, at 1, 2–3 (stating
that the proposal fails to establish that the fees for
the data content underlying consolidated market
data meet the statutory standards of being fair,
reasonable, and not unreasonably discriminatory);
MIAX Letter, supra note 15, at 3. See also BMO
Letter, supra note 15, at 2–3; SIFMA Letter, supra
note 15, at 4–5 (noting that the fees charged by
monopolistic providers, such as exclusive SIPs,
need to be tied to some type of cost-based standard
in order to preclude excessive profits if fees are too
high or underfunding or subsidization if fees are too
low); MayStreet Letter, supra note 15, at 6;
BlackRock Letter, supra note 15, at 2; Proof Letter,
supra note 15, at 2, 3; MEMX Letter, supra note 15,
at 18.
20 See MIAX Letter, supra note 15, at 3; MayStreet
Letter, supra note 15, at 6; BlackRock Letter, supra
note 15, at 2, 4–5; IEX Letter, supra note 15, at 4;
Proof Letter, supra note 15, at 3; MEMX Letter,
supra note 15, at 8, 11–12.
21 See MIAX Letter, supra note 15, at 4; SIFMA
Letter, supra note 15, at 4, 5; IEX Letter, supra note
15, at 4.
22 See MIAX Letter, supra note 15, at 4.
23 See MIAX Letter, supra note 15, at 3; SIFMA
Letter, supra note 15, at 4, 5; IEX Letter, supra note
15, at 1, 2–3.
24 See MIAX Letter, supra note 15, at 3; SIFMA
Letter, supra note 15, at 5;
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primary basis for justifying core data
fees.25 One commenter states that
specific information, including
quantitative information, should be
provided to support the Participants’
claims that the proposed fee is fair and
reasonable because it will permit the
recovery of SRO costs or will not result
in excessive pricing or profits.26
Additionally, some commenters state
that they disagree with the Participants’
statement in the proposal that the Plan’s
Operating Committee ‘‘has no
knowledge of any costs associated with
consolidated market data,’’ stating that
Participants know how much it costs to
collect and disseminate market data
because they already perform this
function, including in connection with
proprietary feeds.27
One commenter states that a
demonstration of costs is not required
because neither the Exchange Act nor
Commission rules requires that market
data fees to be supported by a showing
of costs.28 The commenter stated that
the Commission’s standard for
evaluating consolidated market data fees
has not required a showing of the
relationship between the proposed fees
and the cost of producing the data, as
illustrated by past equity market data
plan proposals for consolidated market
data fees which the commenter states
were not justified on the basis of cost.29
This commenter argues that it is not
clear how the Plan could support the fee
proposals based on costs because the
Operating Committee plays no role in
the creation or dissemination of core
data under amended Rule 603(b), and
thus has no information about how each
exchange would generate core data
under that rule.30 The commenter states
that, in its view, it remains impossible
to separate the costs of producing
25 See IEX Letter, supra note 15, at 1, 2–3; SIFMA
Letter, supra note 15, at 5; MIAX Letter, supra note
15, at 3 (noting that the vast majority of such equity
market data plan fees were adopted prior to
issuance of the Commission’s staff fee guidance,
and multiple SROs have more recently included
cost based analysis when proposing fees for a
market data product).
26 See MIAX Letter, supra note 15, at 3.
27 See SIFMA Letter, supra note 15, at 5; MIAX
Letter, supra note 15, at 3; MayStreet Letter, supra
note 15, at 6.
28 See NYSE Letter, supra note 15, at 3 (stating
that the legislative history of the 1975 amendments
to the Exchange Act, and particularly Section 11A,
reflects that Congress’s principal concern was
promoting competition between exchanges, not
regulating market data pricing; and that economic
studies have demonstrated that separating out the
costs of producing market data from the other costs
of operating an SRO is an impossible task that
would enmesh the Commission in a continuous
ratemaking process that would produce arbitrary
results).
29 See id. at 3–4.
30 See id. at 4.
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market data from other costs of
operating an exchange.31
Another commenter opposes the use
of cost as a basis for setting the
proposed fees.32 This commenter
dismisses other commenters’
suggestions that fees should be based on
costs, rather than value, because,
according to the commenter, the
Commission has not offered guidance
with respect to such a cost-based
ratemaking system,33 and because any
cost allocation between joint products
would therefore be unworkable,
inherently arbitrary, and inconsistent
with the Congressional mandate that the
Commission rely on competition
whenever possible in meeting its
regulatory responsibilities.34 The
commenter states that the proposed fees
have been tested by competition and
that ‘‘Commission staff have indicated
that they would look at factors beyond
the competitive environment, such as
cost, only if a ‘proposal lacks persuasive
evidence that the proposed fee is
constrained by significant competitive
forces.’ ’’ 35
Some commenters oppose the use of
the value-based methodology used to
determine the fees under the Proposed
Amendment.36 One commenter states
that if the objective is to have the SIPs
provide a service that is more affordable
and accessible than the data products
offered by individual exchanges, then
‘‘value to subscribers’’ should not be
sole determinant of SIP fees because the
current fees for exchange proprietary
data products are not a reasonable gauge
of the value of core data offered under
the Plan.37 One commenter states that
basing the proposed pricing of the
Plans’ fees on the proprietary feeds
pricing does not seem appropriate
because exchange proprietary data feeds
are complements to consolidated market
data feeds for latency-sensitive market
31 See
id.
Nasdaq Letter, supra note 15, at 3.
33 See id.
34 See id.
35 See id. at 5–6 (citing to ‘‘Staff Guidance on SRO
Rule Filings Relating to Fees’’ (May 19, 2019),
available at https://www.sec.gov/tm/staff-guidancesro-rule-filings-fees). The Staff Guidance on SRO
Rule Filings Relating to Fees in fact states: ‘‘If a Fee
Filing proposal lacks persuasive evidence that the
proposed fee is constrained by significant
competitive forces, the SRO must provide a
substantial basis, other than competitive forces,
demonstrating that the fee is consistent with the
Exchange Act. One such basis may be the
production of related revenue and cost data, as
discussed further below.’’ See ‘‘Staff Guidance on
SRO Rule Filings Relating to Fees’’ (May 19, 2019),
available at https://www.sec.gov/tm/staff-guidancesro-rule-filings-fees.
36 See Proof Letter, supra note 15; NBIM Letter,
supra note 15; MayStreet Letter, supra note 15.
37 See Proof Letter, supra note 15, at 3.
32 See
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participants; 38 less-latency sensitive
market participants find consolidated
market data more useful than the
propriety data feeds; 39 and latencysensitive market participants will not
view consolidated market data under
the Plans to be a credible substitute for
the proprietary data feeds even after the
MDI Rule reforms are implemented.40
Another commenter states that basing
the proposed fees on value instead of
cost does not work because the mandate
under the Exchange Act is to price SIP
data at levels that maximize its
availability.41
Two commenters argue that the
proposed fees are fair and reasonable
and not unreasonably discriminatory
because they are reasonably related to
the value that subscribers gain from the
data, and achieve the Commission’s
objective in Regulation NMS that prices
for consolidated market data be set by
market forces.42 One commenter argues
that the pricing for exchange proprietary
data feeds, including the depth-of-book
data, top-of-book data, and auction
information on which the proposed fees
are based, is constrained by competitive
forces, in that they have a history of
being constrained by direct competition
and by platform competition among the
exchanges.43 This commenter states that
the pricing for exchange proprietary
data feeds is constrained by the highly
competitive markets for exchange
trading and exchange market data.44 It
states that the proposed fees meet the
Commission’s objective for market
forces to determine the overall level of
fees.45
38 See
NBIM Letter, supra note 15, at 1–2.
id. at 2.
40 See id. at 2.
41 See MayStreet Letter, supra note 15, at 6.
42 See NYSE Letter, supra note 15, at 5; Nasdaq
Letter, supra note 15, at 5.
43 See NYSE Letter, supra note 15, at 5.
44 See id. The commenter further argues that
exchanges compete against each other as platforms,
and that, as such, no exchange can raise its prices
to supracompetitive levels on one side of the
platform, such as market data, without losing sales
on the other, such as trading volume. The
commenter argues that given this inter-exchange
platform competition, the exchanges’ filed prices
for depth-of-book data and auction information are
constrained by market forces. See id. at 6–7.
45 See id. at 5. The commenter stated that by
applying that established ratio to the current prices
for consolidated top-of-book data, the fee proposals
thus reflect the market forces that drive the pricing
of depth-of-book information in relation to top-of
book information and the value that the data has to
market participants. Id. The ratio between such
filed proprietary depth-of-book fees and proprietary
top-of-book data therefore provides the Commission
with a benchmark for evaluating the proposed fees,
which NYSE argues are fair, reasonable, and not
unfairly discriminatory because they are based on
this ratio, which is reflective of market forces. See
id. at 7.
39 See
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This commenter also argues that
basing fees on the value of the
underlying data is the fairest and most
economically efficient method for
setting fees because setting fees
according to the value of the data leads
to optimal consumption: Fees that are
too low do not allow for producers to
remain profitable, while fees that are too
high lead to underutilization.46 The
commenter states that NMS Plans have
historically used value as a fair and
efficient basis for setting fees.47 The
commenter argues that the best basis for
determining the value of core data are
the fees currently charged for
proprietary data fees, which, according
to the commenter, have been ‘‘tested by
competitive forces’’ and therefore
provide a good starting point for
estimating the value of new core data
and for setting fees at efficient levels.48
The commenter argues that the valuebased methodology provides a
substantial basis for showing that
current proprietary fees—and, by
extension, the proposed fees for new
core data—are equitable, fair,
reasonable, and not unreasonably
discriminatory.49 The commenter states
that exchanges cannot overprice the
total prices of their services without
potentially losing order flow and
damaging its overall ability to
compete.50According to this
commenter, exchanges that produce
more valuable market data generally
charge higher fees, and those with less
valuable data charge lower fees,51 so
fees vary according to the underlying
value of the data, as measured by the
liquidity available at the exchange.52
The commenter argues that 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 discriminatory.53
The commenter states that Commission
staff has indicated that they would look
at factors beyond the competitive
environment, such as cost, only if a
proposal lacks persuasive evidence that
the proposed fee is constrained by
significant competitive forces.54 The
commenter argues that, because they are
tested by market competition,
46 See
Nasdaq Letter, supra note 15, at 2.
id.
48 See id. at 2, 6.
49 See id. at 6.
50 See id. at 4.
51 See id.
52 See id.
53 See id. at 5–6.
54 See id. (citing to ‘‘Staff Guidance on SRO Rule
Filings Relating to Fees’’ (May 19, 2019), available
at https://www.sec.gov/tm/staff-guidance-sro-rulefilings-fees).
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47 See
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proprietary data fees provide good and
indicative starting point for estimating
the value of new core data and setting
fees at their efficient level.55 This,
according to the commenter, provides a
substantial basis for showing that
current proprietary fees—and, by
extension, the proposed fees for new
core data—are equitable, fair,
reasonable, and not unreasonably
discriminatory.56
Some commenters object to the way
in which the Participants used the fees
of proprietary depth-of-book products to
calculate a ratio (or multiplier) between
those fees and the fees for proprietary
top-of-book products and then
multiplied existing SIP core top-of-book
data fees by that multiplier to calculate
the proposed depth-of-book fees for
expanded core data under the MDI
Rule.57 One commenter argues that the
approach adopted is arbitrary because it
presupposes that the fees exchanges
charge for their proprietary market data
are fair and reasonable.58 One
commenter states that calculating the
proposed fee levels in this manner—
based on prices charged by the
exchanges for their existing market data
product—is not the right starting point
for setting the proposed fees and
inconsistent with the MDI Rule’s goal of
expanding access to consolidated
data.59 One commenter states that that
the exchanges’ ‘‘platform competition’’
argument that competition for order
flow constrains pricing for market data
does not demonstrate that the fees are
reasonable and mentions studies it has
submitted to the Commission in the past
that bolster their argument.60
Some commenters argue that the
methodology used to calculate the fees
does not account for the transfer of costs
from the SROs to market participants
under the decentralized consolidation
model.61 One commenter states that,
while the proposal leaves fees for
existing core data elements unchanged,
the profits and operating costs of the
exclusive securities information
processors should be deducted from
55 See
id. at 6.
id.
57 See MIAX Letter, supra note 15, at 4; SIFMA
Letter, supra note 15, at 5.
58 See SIFMA Letter, supra note 15, at 5.
59 See MIAX Letter, supra note 15, at 4.
60 See SIFMA Letter, supra note 15, at 5–6.
61 See MEMX Letter, supra note 15, at 18; MIAX
Letter, supra note 15, at 2; BlackRock Letter, supra
note 15, at 2–3; Polygon.io Letter, supra note 15, at
1. On the other hand, one commenter stated that
with respect to comments that the proposal should
‘‘back out’’ fees for the current Processors from the
proposed fee structure, the MDI Rule requires the
current Processors to continue operating for at least
several more years, and that therefore, there are no
savings to back out of any proposed fee structure
at this time. See NYSE Letter, supra note 15, at 7.
56 See
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11791
these fees to reflect the new role of
competing consolidators.62
B. Comments Regarding the Proposed
Fees
1. General Comments
Some commenters state the
methodology used to calculate the
proposed fees resulted in fees that are
too high.63 Some commenters state that
the proposed fees have not been shown
to be fair and reasonable and not
unreasonably discriminatory.64 One
commenter states that the proposed fees
for the content underlying consolidated
market data are too high whether a costbasis or value-basis were used as a
justification by the Participants.65 This
commenter states that the cost of SIP
data is too high relative to top-of-book
proprietary feeds, and that market
participants are currently choosing the
less expensive option of top-of-book
proprietary feeds,66 which, according to
the commenter, indicates that Level 1
consolidated market data is not priced
in accordance with its value to the
market.67 Another commenter
challenges the methodology and
compares the proposed fees to fees
currently charged for proprietary data
fees and the proposed user and access
fees for consolidated market data under
the proposal to the prices that a firm
would pay to obtain that data from
62 See
BlackRock Letter, supra note 15, at 2,
3–4.
63 See BlackRock Letter, supra note 15, at 1–5;
FINRA Letter, supra note 15, at 7; MIAX Letter,
supra note 15, at 2; Angel Letter, supra note 15, at
9; NovaSparks Letter, supra note 15, at 1; BMO
Letter, supra note 15, at 2–3; IEX Letter, supra note
15, at 1, 5; SIFMA Letter, supra note 15, at 1,
4–5; IEX Letter, supra note 15, at 4; MEMX Letter,
supra note 15, at 11–12.
64 See IEX Letter, supra note 15, 1, at 2–3; MIAX
Letter, supra note 15, at 2; MEMX Letter, supra note
15, at 22; SIFMA Letter, supra note 15, at 4–5; BMO
Letter, supra note 15, at 3; FINRA Letter, supra note
15, at 7; MayStreet Letter, supra note 15, at 4;
BlackRock Letter, supra note 15, at 2, 6; Polygon.io
Letter, supra note 15, at 2.
65 See MayStreet Letter, supra note 15, at 6. This
commenter states that the cost of SIP data is too
high relative to top-of-book proprietary feeds, and
that market participants are currently choosing the
less expensive option of top-of-book proprietary
feeds, which, according to the commenter, indicates
that Level 1 consolidated market data is not priced
in accordance with its value to the market. See id.
66 See MayStreet Letter, supra note 15, at 6–7.
67 See id. at 7. The commenter states that Level
1 data should be priced so as to make the content
available at a price that is competitive to
proprietary top-of-book offerings, and that the fact
that the price levels are unchanged from the current
SIP prices reflects a failure by the Participants to
accurately assess the value of Level 1 data. The
commenter states that the value of the depth-ofbook data should focus on greater access and
availability of this kind of data, and adds that the
Operating Committee should consider what price
point would increase availability of depth-of-book
information, rather than charging a multiplier of
proprietary data feeds. See id.
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proprietary data products that offer
similar information.68 This commenter
believes that at any given price a
subscriber would be better off
subscribing to the proprietary data fees
listed instead of purchasing
consolidated market data from the SIPs
given the additional information
included on those feeds.69 The
commenter states that, because the
proposed fees are generally more
expensive than current proprietary data
offering, the Proposed Amendments
clearly fail the ‘‘fair and reasonable’’ test
required by the Exchange Act.70
Some commenters state that the
proposed fees would have an adverse
impact on competition, and on
competing consolidators in particular.71
One commenter states that, even where
the proposed fees are lower than the
fees charged for comparable proprietary
data, the fact that other fees are higher
than proprietary offerings is likely to
reduce incentives for competing
consolidators to actually offer that data
content to their customers.72 Another
commenter expresses concern that if the
Proposed Amendment were approved
the exchanges would entrench a high
level of cost for market data that has no
relation to their underlying expenses, is
not subject to effective competitive
forces, and serves as an formidable
barrier to entry for newer firms.73
One commenter states that the
Proposed Amendment conflates the
prices that competing consolidators and
self-aggregators pay the SROs for the
underlying NMS information, and the
prices that competing consolidators
would charge for the consolidated data
they generate.74 This commenter
believes the proposals do not make clear
that the proposed fees are for the
content underlying the consolidated
market data, as opposed to the
68 See
MEMX Letter, supra note 15, at 6.
id. at 7.
70 See id. at 8.
71 See MIAX Letter, supra note 15, at 1, 3; 4;
MEMX Letter, supra note 15, at 2, 9; 15–17, 21–22,
25; NBIM Letter, supra note 15, at 2; NovaSparks
Letter, supra note 15, at 1; IEX Letter, supra note
15, at 5; SIFMA Letter, supra note 15, at 8; FINRA
Letter, supra note 15, at 5; MayStreet Letter, supra
note 15, at 5; BlackRock Letter, supra note 15, at
1–4; Polygon.io Letter, supra note 15, at 3; Proof
Letter, supra note 15, at 3; Cutler Letter, supra note
15, at 1.
72 See MEMX Letter, supra note 15, at 9. The
commenter further argues that it is unlikely that
there will be any demand for the new data elements
included in consolidated market data at prices that
exceed the fees charged for proprietary data feeds
today. This, the commenter argues, would limit the
potential customer base for competing consolidators
and inappropriately impede the viability of
competing consolidators under the infrastructure
rule. See MEMX Letter, supra note 15, at 17.
73 See Proof Letter, supra note 15, at 1.
74 See MayStreet Letter, supra note 15, at 2.
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consolidated market data itself.75 The
commenter argues that the Participants
confuse the content of consolidated
market data and the consolidated
market data itself,76 and states that the
Proposed Amendment sets prices at
levels that the SIPs currently charge for
consolidated market data.77
One commenter believes that any
analysis of current SIP fees should
include a discussion of what structural
changes could be made to SIP fees to
eliminate or reduce the incentives that
firms have today to avoid providing SIP
data to their customers.78 One
commenter believes that the current
proposal will favor current market data
vendors who already pay for these fees
and have large customer bases, but will
not necessarily use the most efficient
data consolidation solutions.79 This
commenter believes that all of the
equity market data plans should have a
unified feed and price list because most
end users today consume all of the
plans’ feeds.80 Another commenter
states it supports the proposed a la carte
fee structure for the expanded elements
of consolidated data because, in the
commenter’s view, market participants
should be able to select from a variety
of market data products and pay only
for the content they consume.81
2. Fees for Top-of-Book Data
Some commenters believe that the
proposed fees for Level 1 core data,
which include expanded content to
include odd-lot quotations, are too
high.82
One commenter states that the
proposed fees for top-of-book data
should be substantially lower to allow
competing consolidators to operate their
business.83 This commenter states that
exchanges will no longer have to pay for
the current processors and will not have
the burden of maintaining custom feeds
in specific formats since the proprietary
data feeds would be used by the
competing consolidators to distribute
the new SIP market data.84
One commenter states that the net
effect of the proposal is to make core
data fees more expensive that
proprietary data feeds, adding that it
id.
id. at 3.
77 See id. at 6.
78 See MEMX Letter, supra note 15, at 20.
79 See NovaSparks Letter, supra note 15, at 1.
80 See id. at 1–2.
81 See BlackRock Letter, supra note 15, at 2–3.
82 See NovaSparks Letter, supra note 15; IEX
Letter, supra note 15; MayStreet Letter, supra note
15; BlackRock Letter, supra note 15; MIAX Letter,
supra note 15.
83 See NovaSparks Letter, supra note 15, at 1.
84 See id.
seems clear the purpose of the proposal
is ‘‘to protect existing proprietary
market data fee revenues by making
market data from competing
consolidators prohibitively expensive
and their business non-viable.’’ 85
Another commenter states that the cost
of SIP data is too high relative to topof-book proprietary feeds and that
market participants are choosing the
less expensive option of top-of-book
proprietary feeds.86 This commenter
believes this indicates that Level 1
consolidated market data is not priced
in accordance with its value to the
market.87 According to the commenter,
Level 1 data should be priced as to make
the content available at a price that is
competitive to proprietary top-of-book
offerings.88 This commenter further
states that the fact that the price levels
are unchanged from the current SIP
prices reflects a failure by the
Participants to accurately assess the
value of Level 1 data.89 Another
commenter opposes the proposal and
asks the Commission disapprove it as it
represents an overall increase in costs,
including access fees, to end users as
well as competing consolidators,
thereby making market data less
accessible and putting competing
consolidators at a disadvantage.90
One commenter supports certain
aspects of the proposal, including its a
la carte fee structure, and the inclusion
of odd-lot quotations free of charge.91
Moreover, some commenters expressed
support for the proposed inclusion of
odd-lot information free of charge in the
expanded Level 1 core data,92 with one
commenter stating that this would result
in top-of-book information that is more
comprehensive, which should, in turn,
strengthen best execution and enhance
transparency and price discovery.93
One commenter states that the
proposed Level 1 core data fees should
be adjusted to reflect the new role of
competing consolidators.94 The
commenter states that the MDI Rule
fundamentally alters the ecosystem for
market data by transitioning from
exclusive SIPs to competing
consolidators and that the Commission
intended that this change would
unbundle the data fees for consolidated
75 See
76 See
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85 See
IEX Letter, supra note 15, at 5.
MayStreet Letter, supra note 15, at 6–7.
87 See id. at 7.
88 See id.
89 See id.
90 See Cutler Letter, supra note 15, at 1–2.
91 See BlackRock Letter, supra note 15, at 1, 3.
92 See MIAX Letter, supra note 15, at 2;
BlackRock Letter, supra note 15, at 1, 3; MayStreet
Letter, supra note 15, at 2, 3, 6.
93 See BlackRock Letter, supra note 15, at 1, 3.
94 See id. at 2–4.
86 See
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market data from the fees for its
consolidation and distribution because
the prospective fees charged by
competing consolidators would now
include fees for aggregation of
consolidated market data products and
transmission of such products to
subscribers.95 This commenter states
that in leaving fees for existing core data
elements unchanged, the Proposed
Amendment fails to consider, as the
Commission stated in the MDI Rule
Release, that the effective national
market system plan for NMS stocks will
no longer be operating an exclusive SIP
or performing aggregation and other
operational functions.96 The commenter
argues that the proposed fees should not
have been left unchanged from existing
core data elements fees, but rather,
should have been reduced by at least
4%—the estimated SIP operating
expenses excluding profits—to reflect
the new role of competing
consolidators, and deduct both SIP
profits and operating costs from the
price. According to the commenter, this
4% discount is derived directly from
Commission estimates of SIP operating
expenses ($16 million) and revenues
($390 million) in 2018 without any
consideration of possible profits. The
commenter adds that exclusive SIP
profits should also be subtracted from
the proposed fees for core data content,
as ‘‘any markup for consolidation
services should transition to be within
the purview of competing
consolidators.’’ 97 According to the
commenter, keeping core data fees the
same as the proposal purports to do
would effectively ‘‘opaquely raise
prices’’ for this data content.98
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3. Fees for Depth-of-Book Data
Some commenters argue that the
calculation used by the Participants to
determine the proposed depth-of-book
fees is flawed and inconsistent with the
MDI Rule Release because the
calculation uses exchange proprietary
data feeds that include full order-byorder depth-of-book, inclusive of top-ofbook information, rather than the more
limited depth information prescribed by
the MDI Rule Release.99 These
commenters point out that while the
proprietary market data depth-of-book
feeds used to calculate fees for the
consolidated depth-of-book information
95 See
96 See
id. at 3–4.
id. (citing to MDI Rule Release, 86 FR at
18685).
97 See id. at 4, note 12.
98 See id. at 4.
99 See IEX Letter, supra note 15, at 3–4; MEMX
Letter, supra note 15, at 11–12. BlackRock Letter,
supra note 15, at 4–5; FINRA Letter, supra note 15,
at 6.
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include top-of-book data as part of those
offerings, fees for the consolidated
depth-of-book data product under the
proposal do not include top-of-book.100
Consequently, some commenters argue,
subscribers to the new core data would
need to pay an additional surcharge to
receive top-of-book data at current rates
to obtain the same data content that is
available today through proprietary
feeds.101
Some commenters question the
determination of the ratio (or multiplier)
used by the Participants to set the
depth-of-book feeds.102 One commenter
states that fees for depth-of-book
information ‘‘should be adjusted to use
a multiplier of 2.94x to eliminate the
overcharging from double counting top
of book data; otherwise, those who
subscribe to both Level 1 and depth of
book data ‘‘would be paying twice for
top of book content.’’ 103
Some commenters state that an
additional problem with the adopted
approach is that the proprietary depthof-book products, such as those used in
the calculation, are primarily structured
as comprehensive order-by-order feeds,
which do not aggregate orders at each
price level.104 According to these
commenters, the depth-of-book
elements prescribed by the MDI Rule
warrant a lower price because they
prescribe only the aggregated quotes
available at the next five prices beyond
the NBBO and thus include much less
content than these proprietary feeds.105
One commenter states that complete,
order-by-order depth-of-book feeds,
such as those used in the calculation,
are likely to be associated with
‘‘additional operational costs because of
increased message traffic with order by
order data at all price levels.106
Accordingly, the commenter argues that
an aggregated feed with only five levels
of depth should have been priced at a
discount relative to the corresponding
exchange offerings to compensate for
differences in both information content
100 See
id.
IEX Letter, supra note 15, at 4; MEMX
Letter, supra note 15, at 6, 11–12; BlackRock Letter,
supra note 15, at 4–5.
102 See IEX Letter, supra note 15; MEMX Letter,
supra note 15; BlackRock Letter, supra note 15;
FINRA Letter, supra note 15; Angel Letter, supra
note 15; NovaSparks Letter, supra note 15.
103 See BlackRock Letter, supra note 15, at 4–5.
See also IEX Letter, supra note 15, at 4; MEMX
Letter, supra note 15, at 6, 11–12.
104 See IEX Letter, supra note 15, at 4; MEMX
Letter, supra note 15, at 11–12; BlackRock Letter,
supra note 15, at 4–5; FINRA Letter, supra note 15,
at 6.
105 See IEX Letter, supra note 15, at 4; MEMX
Letter, supra note 15, at 11–12. BlackRock Letter,
supra note 15, at 4–5.
106 See BlackRock Letter, supra note 15, at 4–5.
101 See
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11793
and costs.107 One commenter argues
that the proposal fails to consider
pricing for other proprietary data feeds
that are aggregated by price level and
would therefore serve as a more logical
proxy for setting core data fees.108
One commenter states that the
proposal fails to acknowledge or
account for the fact that the proposed
methodology relies on this commenter’s
equity market data fees as one of the
comparison points, notwithstanding
that, unlike the other exchanges’ market
data prices, the commenter’s fees used
do not include individual per user fees,
but apply only on a per firm basis for
firms subscribing to ‘‘real time data.’’ 109
Some commentators believe that the
proposed fees for depth-of-book data
should be lower than proposed. One
commenter states that retail investors
should get free or very low cost depthof-book data because it is in the best
interest of retail investors, the industry
and the Commission.110 This
commenter states that displaying depthof-book data can give investors a better
understanding of how prices are
formed.111 The commenter believes that
the ability for an investor to see buying
and selling interests at various price
levels makes it easier for the investor to
understand what determines the price of
a particular security by seeing the
interaction of market and limit
orders.112 The commenter argues that
making depth-of-book data ‘‘cheap’’
would allow brokers to give the data to
retail clients for no or low cost, and that,
this, in turn, would increase retail
participation in the securities markets,
because investors will not only
understand markets better, but they will
participate more in the markets.113
According to this commenter, if depthof-book data is expensive, it will not
107 See BlackRock Letter, supra note 15, at 4–5.
See also IEX Letter, supra note 15, at 4; MEMX
Letter, supra note 15, at 11–12.
108 See IEX Letter, supra note 15, at 4.
109 See id. The commenter also points out that its
fees do not vary depending on the type of use made
by those firms, do not apply to data that is
redistributed with a delay of as little as 15
milliseconds (whereas exchanges typically require
a 15-minute delay to avoid charges for real-time
data), and were determined and justified based on
costs. The commenter further states that, to the
extent the commenter’s fees are relevant at all, a
more consistent approach would have been to
reflect the commenter’s fees as zero, since this
particular commenter does not charge any fees on
an individual per user basis for either of the two
data products. According to the commenter, the
latter approach would substantially reduce the
average ratio and multiplier, and thus substantially
reduce the fees proposed to be charged for core
data. See id.
110 See Angel Letter, supra note 15, at 3.
111 See id. at 7.
112 See id.
113 See id. at 8.
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help most retail investors because they
will not be able to afford to see it.114
Another commenter states that fees
for depth-of-book are unreasonably
high.115 The commenter states that,
while the Participants decided on an
alternative method in establishing fees
and sought to demonstrate that the
proposed fees are ‘‘related to the value
of the data to subscribers,’’ 116 the
proprietary depth-of-book price inputs
used by the Participants were not
properly calibrated and thus are over
inclusive, resulting in depth-of-book
fees that are unreasonably high.117
One commenter agrees with the
notion that that depth-of-book data
should be priced higher than top-ofbook data.118 This commenter, however,
believes that the charges for depth-ofbook data from the Plans should be
much lower than consuming the market
data directly from the exchanges
because the information provided under
the Plan would still be a subset of what
is provided by the proprietary data
feeds.119 The commenter states that the
4x ratio used by the Participants to
determine the fees for accessing depthof-book data is too high.120
One commenter opposes the proposed
depth-of book data fees, because they, as
well as all other proposed fees,
represent an overall increase in costs to
end users making market data less
accessible, contrary to ‘‘the core precept
of the’’ MDI Rule.121 Another
commenter states that the value of the
depth-of-book data should focus on
greater access and availability of this
114 See
id.
FINRA Letter, supra note 15, at 5–6.
116 See id. at 5.
117 See id. at 6. Specifically, the commenter states
that (1) the proprietary depth-of-book product fees
used in determining the ratio also include
proprietary top-of-book data and auction data—both
of which would be charged separately from depthof-book data; (2) the depth-of-book product fees also
included order-by-order depth information—which
is typically considered more valuable, instead of
aggregated—resulting in a higher ratio and
overstatement of value; and (3) the proposed depthof-book data product fees also included full depth
information, i.e., all prices levels (also typically
considered more valuable), rather than just the top
five price levels required under the MDI Rule,
resulting in a higher ratio and fees that are not
aligned with the value of the new depth-of-book
data to subscribers. The commenter argues that, as
a result, the method employed by the Participants
does not align the proposed fees for the new depthof-book data to the value of the data to subscribers.
See id.
118 See NovaSparks Letter, supra note 15, at 1.
119 See id.
120 See id.
121 See Cutler Letter, supra note 15, at 1. This
comment further states that the level of the
proposed fees would make it difficult for such
competing consolidators to offer products at prices
competitive to those of proprietary feeds thereby
placing competing consolidators at a disadvantage.
See id.
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kind of data, and that the Operating
Committee should thus consider what
price point would increase availability
of depth-of-book information, rather
than charging a multiplier of proprietary
data feeds.122
One commenter expresses support for
the proposed and ‘‘moderately priced’’
non-professional rate for depth-of-book
information, because, in the
commenter’s view, this aspect of the
proposal ‘‘levels the playing field’’ for
retail investors by providing them with
access to the same information that is
available to professionals traders at an
affordable price, which, will help
broaden adoption of this new category
of data.123
4. Fees for Auction Data
Some commenters believe that the
proposed auction information fee would
result in double charging for subscribers
who purchase both auction and depthof-book information.124 According to
these commenters, information about
auction order imbalances is included
with the proprietary depth-of-book data
products used to calculate the depth-ofbook prices; therefore the proposed
depth-of-book prices already
incorporate the fees for auction
imbalance data.125 Thus, these
commenters argue that the proposed
fees would result in double charging
consumers who purchase both auction
and depth-of-book information from
competing consolidators.126 One
commenter states that depth-of-book
pricing is also inappropriately used to
derive the value of auction data because
auction information is more closely
aligned with top-of-book content which
only provides high-level information
about aggregate order imbalances and
does not include the order by order
details or data about multiple price
levels typically included in proprietary
depth-of-book information products.127
One commenter states that while the
pricing rationale in the proposal uses
traded volumes to arrive at a 10%
multiple for auction data, this ratio,
however, is applied to the depth-of-book
feed, which conveys information about
displayed liquidity not trading activity.
According to the commenter, (1) it
would have been more congruent with
the SROs’ proposition to use Level 1
core data as the basis for pricing auction
content as this feed is more closely
associated with trade volume, and (2)
the fees for auction information should
be set to 10% of Level 1 core data
prices.128
Some commenters argue that the fees
for auction information under the
Proposed Amendment should be
lower.129 One commenter states that
retail investors should get free or
moderately priced auction data because
it is in the interests of retail investors,
the industry and the Commission.130
The commenter believes that opening
and closing auction data are important
in the securities markets and that
providing auction data to retail
investors will increase retail investor
participation in the market.131 The
commenter also opines that it makes no
sense for the Participants to charge
professional and non-professionals the
same amount for auction data.132
Another commenter states that the filing
should not be approved because the
price levels do not contribute to a level
playing field between competing
consolidators and the current plan
administrators, such that competing
consolidators will be at a disadvantage
because they will not be able to offer
products at prices competitive with
those of proprietary feeds.133
5. Fees for Professional and NonProfessional Users
Some commenters question the
classification of users by professional or
non-professional to develop the fees
under the Proposed Amendment.134
One commenter states that it is
unreasonably discriminatory against
non-professional users to pay the same
as professional users for auction data
because professionals make far more use
of the data.135 The commenter states
that the filing contains no justification
as to why the Participants propose to
charge professionals the same as nonprofessionals for auction data.136
Some commenters support
moderately priced or free nonprofessional user fees. One commenter
supports the proposed ‘‘moderately
priced’’ non-professional rate for depthof-book information, because, in the
128 See
id.
Angel Letter, supra note 15; Cutler Letter,
supra note 15; BlackRock Letter, supra note 15.
130 See Angel Letter, supra note 15, at 3.
131 See id. at 9.
132 See id.
133 See Cutler Letter, supra note 15, at 1–2.
134 See Angel Letter, supra note 15; BlackRock
Letter, supra note 15; MIAX Letter, supra note 15;
Polygon.io Letter, supra note 15.
135 See Angel Letter, supra note 15, at 9–10.
136 See id. at 10.
129 See
122 See
MayStreet Letter, supra note 15, at 7.
BlackRock Letter, supra note 15, at 3, 5.
124 See MEMX Letter, supra note 15, at 11–12.
BlackRock Letter, supra note 15, at 4–5; FINRA
Letter, note 15, at 6.
125 See id.
126 See BlackRock Letter, supra note 15, at 4–5;
MEMX Letter, supra note 15, at 11–12; FINRA
Letter, supra note 15, at 6.
127 See BlackRock Letter, supra note 15, at 5.
123 See
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commenter’s view, this aspect of the
proposal ‘‘levels the playing field’’ for
retail investors by providing them with
access to the same information that is
available to professionals traders at an
affordable price, which, will help
broaden adoption of this new category
of data.137 Another commenter states
that free or moderately priced nonprofessional data, including depth-ofbook and auction data, is in the best
interest of brokers and exchanges
because it may increase retail order flow
and thus profits into the industry.138
The commenter further believes that
free or moderately priced nonprofessional data is in the best interest
of the Commission as well because
‘‘[p]roviding better data to retail
investors at low cost will reduce the
amount of SEC resources devoted to
dealing with complaints based on
misunderstandings of market
function.’’ 139
Two commenters state they supported
the part of the Proposed Amendment
that consists of low non-professional
user fees.140 One commenter states that
it believes the proposed nonprofessional user fees were a step in the
right direction, but states that the Plan
would charge fees for professional and
non-professional users that are often
higher than the fees charged by all of the
exchange combined for proprietary
products, creating disincentives for
firms to take SIP data.141 The
commenter advocates for fees that
would expand access to consolidated
market data including free access to
odd-lot quotation information as well as
cheaper access to depth-of-book
quotation information for nonprofessional users.142
Some commenters suggest that the
Participants should not categorize fees
based on user type and suggest on ways
to improve the Proposed Amendment as
it relates to these types of user
classifications. One commenter urges
the Commission to disapprove the
Proposed Amendment and any future
amendment that maintains nonprofessional and professional user
classifications because such
classifications prevent competing
consolidators from being able to offer
products at competitive prices
compared to the proprietary data
feeds.143 One commenter recommends
easier-to-track proxies for usage-based
charges by utilizing data already
reported by firms, such as FOCUS
Reports.144 Another commenter suggests
slowing down the data feeds by 15
milliseconds to mitigate the risk of
professionals ‘‘masquerading’’ as nonprofessionals utilizing the cheaper
data.145 One commenter states that the
proposed professional user fees are
based on a flawed methodology that
fails to provide a cost based
justification, and results in excessive fee
levels which would discourage firms
from registering as competing
consolidators and hinder the formation
of the decentralized consolidation
model that the MDI Rule seeks to
create.146
Another commenter believes that the
Operating Committees should analyze
whether it is fair and reasonable to
continue to charge professional and
non-professional user fees that exceed
the fees charges for similar proprietary
market data.147 This commenter argues
that the Proposed Amendment should
be disapproved because, for some firms,
the professional fees proposed may be
higher than if the firms purchased
certain proprietary data products.148
However, another commenter responds
that this analysis does not account for
the fact that purchasers of the new data
would be receiving a consolidated data
product that aggregates all exchanges’
data together to determine an NBBO and
the five best levels of depth among all
the exchanges and disregards that the
Proposed Amendment includes much
lower fees for non-professionals.149 The
commenter states that it is fair,
reasonable, and not unreasonable
discriminatory for ‘‘Wall Street to pay
higher fees than Main Street.’’ 150
6. Fees for Non-Display Use
Some commenters state that the
proposed Non-Display Use fees are
based on a flawed methodology that
fails to provide a cost based
justification, results in excessive fee
levels which would discourage firms
from registering as competing
consolidators and hinder the formation
of the decentralized consolidation
model that the MDI Rule seeks to
create.151 One commenter states that the
fees in the Proposed Amendment,
including the non-display fees, would
place competing consolidators at a
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144 See
137 See
BlackRock Letter, supra note 15, at 1, 3.
138 See Angel Letter, supra note 15, at 11.
139 See id. at 11.
140 See MIAX Letter, supra note 15, at 2; MEMX
Letter, supra note 15, at 3.
141 See MEMX Letter, supra note 15, at 3, 18–19.
142 See id. at 2.
143 See Polygon.io Letter, supra note 15, at 2–3.
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MayStreet Letter, supra note 15, at 8.
Angel Letter, supra note 15, at 11.
146 See MIAX Letter, supra note 15, at 3.
147 See MEMX Letter, supra note 15, at 20.
148 See id.
149 See NYSE Letter, supra note 15, at 8.
150 See id.
151 See MIAX Letter, supra note 15, at 3;
Polygon.io Letter, supra note 15, at 2–3.
145 See
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disadvantage because they will not be
able to offer products at prices
competitive with those of proprietary
feeds.152
One commenter asks that the
Commission reject that Amendment and
any future proposal that maintains
display/non-display and professional/
non-professional classifications.153 The
commenter states that, if the Proposed
Amendment is not rejected, competing
consolidators will not be able to offer
products at competitive prices to
proprietary data feeds.154
7. Access Fees
One commenter states that the
proposed Access fees are based on a
flawed methodology that fails to provide
a cost based justification, and results in
excessive fee levels which would
discourage firms from registering as
competing consolidators and hinder the
formation of the decentralized
consolidation model that the MDI Rule
seeks to create.155 Another commenter
stated that the proposed access fees are
not fair and reasonable because they are
more expensive than those fees charged
by exchanges in the proprietary
products.156
8. Redistribution Fees
Two commenters suggest that the
imposition of redistribution fees on
competing consolidators would place
competing consolidators at a
competitive disadvantage.157 Another
commenter states that by charging
redistribution fees to competing
consolidators, the filing creates a barrier
to entry to technology solution vendors
to become competing consolidators.158
One commenter states that the
Proposed Amendment should treat
competing consolidators as
replacements to the exclusive SIPs, not
as data vendors.159 It states that
subjecting competing consolidators to
the same fees as data vendors and
subscribers that receive consolidated
market data from the exclusive SIP fails
to recognize that competing
consolidators are SIPs and not similarly
situated to today’s data vendors.160 This
152 See
Cutler Letter, supra note 15, at 1–2.
Polygon.io Letter, supra note 15, at 2.
154 See id. at 3.
155 See MIAX Letter, supra note 15, at 3.
156 See MEMX, supra note 15, at 6, 8. See also
Cutler Letter, supra note 15, at 1–2 (noting that it
supports the comment letter written by MEMX and
that the Proposed Amendment makes market data
less accessible).
157 See NBIM Letter, supra note 15, at 2; Cutler
Letter, supra note 15, at 1–2.
158 See NovaSparks Letter, supra note 15, at 1.
159 See MayStreet Letter, supra note 15, at 3.
160 See id. at 3–4.
153 See
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commenter further states that that
competing consolidators should not be
charged redistribution fees because they
are not redistributing consolidated
market data, but generating and
distributing it for the first time.161
According to this commenter, these fees
for redistribution should not be charged
by the Plan because the Plan no longer
would govern the distribution of
consolidated market data.162 The
commenter states that by not
recognizing competing consolidators as
SIPs, competing consolidators are
placed at a competitive disadvantage
relative to data vendors given that they
take on expenses and risks that data
vendors do not, such as the costs for
generating consolidated market data,
disclosing operational and performance
metrics, registering with the
Commission, and complying with Rule
614 of Regulation NMS.163
One commenter states that the
proposed redistribution fee that would
be charged to competing consolidators
is inconsistent with the purposes and
structure of the MDI Rule, and that this
aspect of the proposal represents a
‘‘further indication that the intent of the
majority was to subvert the purpose of
the Commission’s order.’’ 164 Another
commenter states that the redistribution
fee for competing consolidators is
inconsistent with the MDI Rule, not fair
and reasonable, and unreasonably
discriminatory.165 One commenter
states that the proposal’s attempt to
justify the redistribution fee based on
the current centralized model that
charges fees to downstream vendors is
unsound because, under the
decentralized MDI Rule, competing
consolidators would be ‘‘stepping into
the role that the SIPs hold today as the
primary sources of consolidated market
data.’’ 166 According to this commenter,
to charge a redistribution fee on top of
the other proposed fees would
‘‘unquestionably put competing
consolidators at a further competitive
disadvantage as compared to aggregated
proprietary data products offered by
161 See
id.
id., at 5.
163 See id.
164 See IEX Letter, supra note 15, at 5.
165 See MIAX Letter, supra note 15, at 2 (citing
the MDI Rule Release which stated that ‘‘imposing
redistribution fees on data content underlying
consolidated market data that will be disseminated
by competing consolidators would be difficult to
reconcile with the standards of being fair and
reasonable and not unreasonably discriminatory in
the new decentralized model,’’ and that ‘‘fees
proposed by the SROs should not contain
redistribution fees for competing consolidators
because this would hinder their ability to
compete.’’).
166 See id.
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exchanges,’’ thus targeting them in an
unfair and unreasonable manner.167
One commenter states the Proposed
Amendment directly contradicts the
Commission’s directive in the MDI Rule
that competing consolidators not be
treated the same as market data
vendors.168 It believes that Participants
are attempting to undermine the
Commission’s authority over market
data as enumerated in the CT Plan and
MDI Rule in order to preserve their
current revenues from proprietary and
SIP data.169 It states that the Participants
have taken the position that the
competing consolidators should be
charged redistribution fees just like any
market data vendor. It believes this
undermines the efforts of the MDI
Rule.170 The commenter reiterates the
Commission’s statement in the MDI
Rule Release that ‘‘the Commission
believes that the fees for the data
content underlying consolidated market
data should not include redistribution
fees for competing consolidators.
Competing consolidators will take the
place of the exclusive SIPs in the
dissemination of consolidated market
data, which today do not pay
redistribution fees for the consolidation
and dissemination of SIP data.’’ 171 The
commenter argues that by treating
competing consolidators differently
than the exclusive SIPs, the Participants
are acting in an unreasonably
discriminatory manner, effectively
disregarding the Exchange Act mandates
in addition to the Commission’s
directive in the MDI Rule.172 The
commenter argues that imposing
redistribution fees on competing
consolidators imposes an undue burden
on competition in contravention of the
standards under Section 3(f) of the
Exchange Act that the Commission must
consider in connection with any
Commission rulemaking or review of
SRO rules.173
Two commenters state that the
redistribution fees charged to competing
consolidators are in contravention of the
Commission’s express direction in the
MDI Rule and that the Proposed
Amendment disregards the directive.174
One commenter states that, although
the Commission compared competing
consolidators to self-aggregators, a more
appropriate comparison would be
between competing consolidators and
167 See
id.
SIFMA Letter, supra note 15, at 4–5.
169 See id. at 6.
170 See id. at 7.
171 See id.
172 See id., at 8.
173 See id.
174 See FINRA Letter, supra note 15, at 5; MEMX
Letter, supra note 15, at 21.
168 See
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downstream vendors.175 According to
this commenter, because such vendors
would be subject to redistribution fees
when redistributing data to its
subscribers, it would impose a burden
on competition and be unfair to vendors
not to charge a redistribution fee for
exactly the same activity to competing
consolidators.176
9. Broker-Dealer Enterprise Cap
One commenter favors expanding the
broker-dealer enterprise cap that is part
of the current fee schedule of the Plan.
The commenter states that the Proposed
Amendment provides no depth-of-book
enterprise cap and the Level 1
enterprise caps are out of reach for most
market Participants.177 In particular,
this commenter recommends that
enterprise caps be implemented at
multiple tiers levels.178
C. NMS Plan Governance
Some commenters state that the MDI
Rule should be implemented through
the CT Plan, as opposed to the existing
market data equity plans (i.e., the CTA/
CQ, and Nasdaq/UTP Plans).179 One
commenter reiterated its continued
support for the provisions of the CT
Plan overall.180 The commenter states
that the real and potential conflicts of
interest that currently exist relating to
the provision of market data directly
relate to the decision-making problems
at the Plans’ Operating Committees.181
The commenter supports expanding the
voting representation under the CT Plan
to non-SROs and having them
participate as full voting members of the
Operating Committee.182 The
commenter believes the Commission
cannot approve the Proposed
Amendment given the inherent conflicts
of interests of the SROs who developed
the proposals.183 The commenter states
that, if the Commission approved the
Proposed Amendment, it would be
giving tacit approval to the
shortcomings in the governance
structure of the current Plans.184
This commenter also notes that the
proposed fee amendments are explicitly
stated by the Participants to be
unrelated to the cost of providing the
175 See
NYSE Letter, supra note 15, at 7.
id.
177 See MayStreet Letter, supra note 15, at 8.
178 See id. at 8.
179 See BMO Letter, supra note 15; MEMX Letter,
supra note 15; MIAX Letter, supra note 15; IEX
Letter, supra note 15; and Polygon.io Letter, supra
note 15.
180 See BMO Letter, supra note 15, at 1.
181 See id. at 2.
182 See id.
183 See id.
184 See id.
176 See
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data, but rather to subscriber value.185
The commenter states that this is a clear
example of the Plan’s Operating
Committee failing to ensure that the
public service mandates of the SIPs are
achieved and is a failure in governance
through the unmitigated conflicts of
interest by voting members who just
want to maximize profits.186 The
commenter states that further evidence
of the failure of the governance structure
on the Operating Committee is that the
fee proposals have been proposed while
the remaining reforms of the CT Plan are
stayed pending resolution of challenges
in the D.C. Circuit.187 The commenter
states that it is surprised that the
proposals were filed without broader
participation, given that certain
members of the Operating Committee
have stated publicly that the proposals
contradict the Exchange Act standards
for consolidated data which requires
that the fees be fair, reasonable, and not
unreasonably discriminatory.188
Another commenter also encourages
the Commission to consider whether the
CT Plan is a more appropriate body for
setting fees for consolidated market
data.189 This commenter believes that
placing the responsibility for setting fees
in the hands of the CT Plan would allow
SIP fees to be set by an Operating
Committee that better reflects the
constituencies impacted by this filing,
including non-SRO representatives.190
A second commenter states that the fee
proposals are ‘‘the result of a conflicted
and unbalanced voting process,’’ adding
that it agreed with the recommendation
that the responsibility for setting the
proposed fees should be placed on the
CT Plan.191 A third commenter
recommends that the Commission
disapprove the proposal and reassign
the responsibility for the filing to the
Operating Committee for the CT Plan,
which the commenter states would have
a ‘‘broader set of voting stakeholders
and a fairer and less conflicted
governance structure,’’ a change that, as
this proposal shows, is ‘‘badly’’
needed.192
One commenter asks the Commission
to reevaluate the process that led to the
creation of the Proposed Amendment
and make substantive changes to avoid
185 See
id.
id. at 2–3.
187 See id. at 3.
188 See id. (citing note 14 of the Notice, which
states in part: ‘‘FINRA, IEX, LTSE, MIAX, and
MEMX have not joined in the decision to approve
the filing of the proposed amendment, and Nasdaq
BX is also withholding its vote at this time.’’).
189 See MEMX Letter, supra note 15, at 23–24.
190 See id.
191 See MIAX Letter, supra note 15, at 5.
192 See IEX Letter, supra note 15, at 5.
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the amendment process being used to
derail timely implementation of the MDI
Rule.193
D. Consideration of Other Actions
Under Rule 608 of Regulation NMS
In connection with recommending
disapproval of the Proposed
Amendment, one commenter states the
Commission could consider potential
action under Rule 608(a)(2) of
Regulation NMS, which allows the
Commission to directly propose
amendments to effective national
market system plans.194 The commenter
states that in connection with a
Commission disapproval of the
Proposed Amendment, it would
‘‘support the Commission’s efforts to
ensure that the newly expanded
consolidated market data (i.e., new core
data) under the Commission’s
Infrastructure Rule is disseminated in a
manner consistent with the Exchange
Act standards to ensure the investing
public and all market participants have
fair and reasonable access to it.’’ 195
One commenter believes that it would
be inconsistent with the Exchange Act
and Rule 608 for the Commission to sua
sponte change any or all of the proposed
fees, as any such change would be
material to the Proposed
Amendment.196 The commenter states
that, in its view, if the Commission
intends to revise the Proposed
Amendment in any material way, it
must do so through rule-making under
Rule 608(b)(2), by providing public
notice of the specific changes it
proposes and giving the Participants
and general public an opportunity to
comment.197
IV. Proceedings To Determine Whether
To Approve or Disapprove the
Proposed Amendment
The Commission is instituting
proceedings pursuant to Rule
608(b)(2)(i) of Regulation NMS,198 and
Rule 700 of the Commission’s Rules of
Practice,199 to determine whether to
approve or disapprove the Proposed
Amendment or to approve the Proposed
Amendment with any changes or
subject to any conditions the
Commission deems necessary or
appropriate after considering public
comment. Institution of proceedings
does not indicate that the Commission
has reached any conclusions with
respect to any of the issues involved.
193 See
Polygon.io Letter, supra note 15, at 3.
SIFMA Letter, supra note 15, at 2.
195 See id.
196 See NYSE Letter, supra note 15, at 8.
197 See id.
198 17 CFR 242.608.
199 17 CFR 201.700.
194 See
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Rather, the Commission seeks and
encourages interested persons to
provide additional comment on the
Proposed Amendment to inform the
Commission’s analysis.
Rule 608(b)(2) of Regulation NMS
provides that the Commission ‘‘shall
approve a . . . proposed amendment to
a national market system plan, with
such changes or subject to such
conditions as the Commission may
deem necessary or appropriate, if it
finds that such . . . amendment is
necessary or appropriate in the public
interest, for the protection of investors
and the maintenance of fair and orderly
markets, to remove impediments to, and
perfect the mechanisms of, a national
market system, or otherwise in
furtherance of the purposes of the
Act.’’ 200 Rule 608(b)(2) further provides
that the Commission shall disapprove a
proposed amendment if it does not
make such a finding.201 Pursuant to
Rule 608(b)(2)(i) of Regulation NMS,202
the Commission is providing notice of
the grounds for disapproval under
consideration:
• Whether the Proposed Amendment
is consistent with the Commission’s
MDI Rule; 203
• Whether, consistent with Rule 608
of Regulation NMS, the Proposed
Amendment is necessary or appropriate
in the public interest, for the protection
of investors and the maintenance of fair
and orderly markets, to remove
impediments to, and perfect the
mechanisms of, a national market
system, or otherwise in furtherance of
the purposes of the Act; 204
• Whether, consistent with Rule
603(a) and 614(d)(3) of Regulation NMS,
the Proposed Amendment provides for
the distribution of information with
respect to quotations for and
transactions in NMS stocks on terms
that are fair and reasonable and not
unreasonably discriminatory;
• Whether modifications to the
Proposed Amendment, or conditions to
its approval, would be required to make
the Proposed Amendment necessary or
appropriate in the public interest, for
the protection of investors and the
maintenance of fair and orderly markets,
to remove impediments to, and perfect
the mechanisms of, a national market
system, or otherwise in furtherance of
the purposes of the Act; 205
• Whether the Proposed Amendment
is consistent with Congress’s finding, in
200 See
17 CFR 242.608(b)(2).
id.
202 17 CFR 242.608(b)(2)(i). See also Commission
Rule of Practice 700(b)(2), 17 CFR 201.700(b)(2).
203 See MDI Rule Release, supra note 9.
204 See 17 CFR 242.608(b)(2).
205 See id.
201 See
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Section 11A(1)(C)(iii) of the Act, that it
is in the public interest and appropriate
for the protection of investors and the
maintenance of fair and orderly markets
to ensure ‘‘the availability to brokers,
dealers, and investors or information
with respect to quotations for and
transactions in securities’’; 206 and
• Whether, consistent with the
purposes of Section 11A(c)(1)(B) of the
Act,207 the Proposed Amendment’s
provisions are drafted to support the
prompt, accurate, reliable, and fair
collection, processing, distribution, and
publication of information with respect
to quotations for and transactions in
NMS securities, and the fairness and
usefulness of the form and content of
such information.
Under the Commission’s Rules of
Practice, the ‘‘burden to demonstrate
that a NMS plan filing is consistent with
the Exchange Act and the rules and
regulations issued thereunder . . . is on
the plan participants that filed the NMS
plan filing.’’ 208 The description of the
NMS plan filing, its purpose and
operation, its effect, and a legal analysis
of its consistency with applicable
requirements must all be sufficiently
detailed and specific to support an
affirmative Commission finding.209 Any
failure of the plan participants that filed
the NMS plan filing to provide such
detail and specificity may result in the
Commission not having a sufficient
basis to make an affirmative finding that
the NMS plan filing is consistent with
the Exchange Act and the applicable
rules and regulations thereunder.210
V. Commission’s Solicitation of
Comments
The Commission requests that
interested persons provide written
submissions of their views, data, and
arguments with respect to the issues
identified above, as well as any other
concerns they may have with the
proposal. In particular, the Commission
invites the written views of interested
persons concerning whether the
proposal is consistent with Section 11A
or any other provision of the Act, or the
rules and regulations thereunder.
Although there do not appear to be any
issues relevant to approval or
disapproval that would be facilitated by
an oral presentation of views, data, and
arguments, the Commission will
consider, pursuant to Rule 608(b)(2)(i)
of Regulation NMS,211 any request for
206 15
U.S.C. 78k–1(a)(1)(C)(iii).
15 U.S.C. 78k–1(c)(1)(B).
208 17 CFR 201.700(b)(3)(ii).
209 Id.
210 Id.
211 17 CFR 242.608(b)(2)(i).
207 See
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an opportunity to make an oral
presentation.212 The Commission asks
that commenters address the sufficiency
and merit of the Participants’ statements
in support of the Proposed
Amendment,213 in addition to any other
comments they may wish to submit
about the proposed rule changes. In
particular, the Commission seeks
comment on the following:
1. In the MDI Rule Release, the
Commission stated that ‘‘the fees for the
data content underlying consolidated
market data must satisfy the statutory
standards of being fair, reasonable and
not unreasonably discriminatory.’’ 214
What are commenters’ views as to each
of the fees proposed?
2. In the Cover Letter,215 the
Participants state that ‘‘under the
decentralized competing consolidator
model, the Operating Committee has no
knowledge of any of the costs associated
with consolidated market data.’’ The
Participants further state that, under the
decentralized competing consolidator
model described in the MDI Rule
Release, the Plan’s Operating Committee
no longer has a role in either specifying
the technology associated with
exchanges providing data or contracting
with a SIP and that each national
securities exchange will be responsible
for determining the methods of access to
and format of data necessary to generate
consolidated market data. The
Participants also state that the Operating
Committee will not have access to
information about how each exchange
would generate the data that they each
would be required to disseminate under
amended Rule 603(b). According to the
Participants, the Operating Committee
does not have access to any information
about the cost of providing consolidated
market data under the decentralized
competing consolidator model.
Do commenters agree with the
statements that the Participants have
made with respect to their ability,
current or future, to determine the costs
of generating consolidated market data?
3. What are commenters’ views on the
Participants argument that a ‘‘valuebased’’ methodology is an appropriate
basis to determine the fees for core data?
What are commenters’ views on the
methodology proposed by the
Participants?
212 Rule 700(c)(ii) of the Commission’s Rules of
Practice provides that ‘‘[t]he Commission, in its sole
discretion, may determine whether any issues
relevant to approval or disapproval would be
facilitated by the opportunity for an oral
presentation of views.’’ 17 CFR 201.700(c)(ii).
213 See Notice, supra note 6.
214 See MDI Rule Release, supra note 9, 86 FR at
18684.
215 See Cover Letter, supra note 1.
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Sfmt 4703
4. What are commenters’ views on
whether the comparison of exchanges’
proprietary depth-of-book fees to the
current SIP feeds is an appropriate
means to calculate the ‘‘value’’ of
consolidated market data? Do
commenters believe that the pricing for
individual exchange market data
products can serve as an appropriate
means for justifying the proposed fees?
What are commenters’ views on the
prices of the depth-of-book feeds—
whether by reference to cost or to prices
set by a competitive market for equity
market data as opposed to market
power?
5. What are commenters’ views on the
Participants’ calculation of the
appropriate ratio to be applied to
current SIP fees to generate the
proposed fees for content underlying
consolidated market data? Were
appropriate depth-of-book products
selected for the calculation? What are
commenters’ views about the ratios and
methodology used generate fees?
6. Under the Proposed Amendment,
the consolidated market data depth-ofbook product would not include top-ofbook data. What are commenters’ views
on basing the price of depth-of-book
consolidated market data on the fees for
proprietary products that do not include
top-of-book data?
7. In the Cover Letter,216 the
Participants state that they reviewed the
depth-of-book to top-of-book ratios of
Professional device rates on Nasdaq
(Nasdaq Basic/Nasdaq TotalView), Cboe
(Cboe Full Depth), NYSE (BQT/NYSE
Integrated), and IEX (TOPS/DEEP) to
determine an appropriate ratio between
the fees of depth-of-book core data
products and the current Level 1 (topof-book) data. The Participants further
state that they believe that the 3.94x
ratio represents the difference in value
between top-of-book data and five levels
of depth that would be required to be
included in consolidated market data
under amended Rule 603(b). What are
commenters’ views on setting fees under
the Proposed Amendment based on the
ratio of fees for depth-of-book and topof-book proprietary data products?
8. Under the Proposed Amendment,
the consolidated market data depth-ofbook product would include only
aggregate order information at each
price level, not order-by-order data.
What are commenters’ views on
whether the price of depth-of-book
consolidated market data should be
based on the fees for proprietary
products that include order-by-order
data? What are commenters’ views on
the selection of the referenced
216 See
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proprietary data products used to price
the fees in the Proposed Amendment,
including other exchange fees
considered but not selected as a
reference for the development of pricing
under the Proposed Amendment?
9. Under the Proposed Amendment,
the consolidated market data depth-ofbook product would not include auction
data, which would be sold separately.
What are commenters’ views on
whether the price of depth-of-book
consolidated market data should be
based on the fees for proprietary depthof-book products that include auction
data?
10. What are commenters’ views on
whether users should be classified as
professionals and non-professionals
under the Proposed Amendment?
Should non-professional subscribers to
pay the same fees as professional
subscribers for the auction data under
the Proposed Amendment? Why or why
not? Should professionals to pay a
different price than non-professionals
for products other than auction data
under the Proposed Amendment? Why
or why not? If commenters believe that
classification based on user type for the
contents of the consolidated market data
is appropriate, do commenters support
or oppose low-cost non-professional
user fees? Why or why not?
11. What are commenters’ views on
the non-display fees in the Proposed
Amendment?
12. What are commenters’ views on
the access fees in the Proposed
Amendment? What are commenters’
views on whether the Participants
should charge access fees? Should
competing consolidators be required to
pay access fees? Why or why not?
Should access fees be treated like
connectivity fees, market data fees, or
something else? Why or why not?
13. What are commenters’ views on
how the cost of purchasing consolidated
top-of-book, depth-of-book, and auction
data under the Proposed Amendment
compares to the cost of subscribing to
the existing proprietary data feeds that
would contain similar or more data?
What are commenters’ views regarding
the relationship of this comparison to
the fees under the Proposed
Amendment?
14. The Commission stated in the MDI
Rule Release that ‘‘imposing
redistribution fees on data content
underlying consolidated market data
that will be disseminated by competing
consolidators would be difficult to
reconcile with the standards of being
fair and reasonable and not
unreasonably discriminatory in the new
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17:34 Mar 01, 2022
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decentralized model,’’ 217 and that ‘‘fees
proposed by the SROs should not
contain redistribution fees for
competing consolidators because this
would hinder their ability to
compete.’’ 218 What are commenters’
views on the justification offered by the
Participants in favor of charging
redistribution fees to competing
consolidators? What are commenters’
views regarding competing
consolidators being treated similarly to
data vendors and charged redistribution
fees? Would charging redistribution fees
to competing consolidators (and thus
subjecting them to the same fees as
vendors and subscribers) place them at
a competitive disadvantage to the
exchanges offering proprietary market
data for sale? Why or why not? Do
commenters believe that imposing
redistribution fees on competing
consolidators would impose a burden
on competition? Why or why not? What
are commenters’ views on the level of
redistribution fees in the Proposed
Amendment?
15. What are commenters’ views on
the prices for Level 1 core data, which
has been expanded to include odd-lot
quotations?
16. What are commenters’ views on
whether the operating costs of the
exclusive SIPs should be deducted from
the Level 1 fees in the Proposed
Amendment to reflect the new role of
competing consolidators? If so, how
should they be taken into account?
What are commenter’s views on
whether the operating costs of the
exclusive SIPs should be taken into
account in determining the fees for
depth-of-book core data? If so, how
should they be taken into account? Do
commenters believe that the new fees
for Level 1 core data should have been
proposed by the Participants? Why or
why not? What are commenters’ views
on how any new fees for Level 1 data
should have been determined?
17. Overall, what are commenters’
views on the proposed prices for
consolidated depth-of-book data? How
do commenters believe the cost of
depth-of-book data under the Plan
should compare to consuming the same
or similar data directly from the
exchanges? Do commenters believe that
the proposed price point for depth-ofbook data would increase the
availability of the information for
investors? Why or why not? Do
commenters believe that the calculation
of the proposed depth-of-book data fee
would essentially double-charge
217 See MDI Rule Release, supra note 9, 86 FR at
18685.
218 See id., 86 FR at 18682, n.1136.
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Frm 00114
Fmt 4703
Sfmt 4703
11799
customers for top-of-book information
that they would have to buy separately
through the Level I feed? Why or why
not? What are commenters’ views on the
statement in the Proposed Amendment
that depth-of-book data may not be
redistributed on a delayed basis?
18. What are commenters’ views on
the prices for auction information? Do
commenters believe the proposed prices
for auction information are priced too
high, too low, or at the correct level?
Why or why not? What are commenters’
views on the lack of a distinction
between prices charged to professional
and non-professional users for auction
information? What are commenters’
views on the statement in the Proposed
Amendment that auction information
may not be redistributed on a delayed
basis?
19. In the Cover Letter,219 the
Participants stated that, with respect to
the fees for auction information, they
looked to the percentage of average
dialing trading volume that occurs
during an auction process and
determined that roughly 10% of the
trading volume takes place in auctions.
The Participants stated that they
therefore believe that charging a fee for
auction data that is 10% of the fee
charged for depth-of-book data
appropriately reflects the value of
auction information. What are
commenters’ views about this method
for determining the fees for auction
data?
20. What are commenters’ views on
the lack of an enterprise fee cap in the
proposal? Should enterprise caps have
been proposed by the Participants for
each category of data (e.g., Level 1,
depth-of-book, auction information)?
Should multiples enterprise caps have
been proposed to reflect different size
enterprises? Why or why not?
21. What are commenters’ views on
the Participants’ clarification in the
Proposed Amendment that the Per
Query Fee would not apply to the
expanded market data content required
by the MDI Rule and would only be
available for the receipt and use of the
Level 1 Service?
22. In the Cover Letter, the
Participants state that FINRA OTC Data
will not be provided to competing
consolidators, although it is still being
provided to the UTP Processor for
inclusion in the consolidated market
data made available by the UTP
Processor. What are commenters’ views
on the Participants’ proposal to add
clarifying language to make clear that
UTP Level 1 Service obtained from the
Processor would include FINRA OTC
219 See
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Data but would not include odd-lot
information?
23. What are commenters’ views on
the belief of some market participants
that conflicts of interest by the
Participants who also sell proprietary
data products have resulted in proposed
fees that are not fair, reasonable, and
unreasonably discriminatory? 220 What
are commenters’ views on whether the
opinions of the advisory committee
members and SROs who did not vote in
favor of the Proposed Amendment
should have been accommodated in the
Proposed Amendment?
24. Should the Commission approve
or disapprove the Proposed
Amendment? Why or why not? Should
the Commission approve the Proposed
Amendment with modifications? If so,
what modifications would be
appropriate and why?
Interested persons are invited to
submit written data, views, and
arguments regarding whether the
proposal should be approved or
disapproved by March 23, 2022. Any
person who wishes to file a rebuttal to
any other person’s submission must file
that rebuttal by April 6, 2022.
Comments may be submitted by any of
the following methods:
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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 No. S7–24–
89 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 No.
S7–24–89. 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
220 See
Section III.C, supra.
VerDate Sep<11>2014
20:46 Mar 01, 2022
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
Participants’ principal offices. 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 File No. S7–24–89 and
should be submitted on or before March
23, 2022.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.221
Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2022–04332 Filed 3–1–22; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #17354 and #17355;
NEBRASKA Disaster Number NE–00094]
Presidential Declaration of a Major
Disaster for Public Assistance Only for
the State of Nebraska
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
221 17
Jkt 256001
PO 00000
CFR 200.30–3(a)(85).
Frm 00115
Fmt 4703
Sfmt 4703
Percent
For Physical Damage:
Non-Profit Organizations with
Credit Available Elsewhere ...
Non-Profit Organizations without Credit Available Elsewhere .....................................
For Economic Injury:
Non-Profit Organizations without Credit Available Elsewhere .....................................
1.875
1.875
1.875
The number assigned to this disaster
for physical damage is 17354 B and for
economic injury is 17355 0.
(Catalog of Federal Domestic Assistance
Number 59008)
Barbara Carson,
Acting Associate Administrator for Disaster
Assistance.
This is a Notice of the
Presidential declaration of a major
disaster for Public Assistance Only for
the State of Nebraska (FEMA–4641–DR),
dated 02/23/2022.
Incident: Severe Storms, Straight-Line
Winds, and Tornadoes.
Incident Period: 12/15/2021.
DATES: Issued on 02/23/2022.
Physical Loan Application Deadline
Date: 04/25/2022.
Economic Injury (EIDL) Loan
Application Deadline Date: 11/23/2022.
ADDRESSES: Submit completed loan
applications to: U.S. Small Business
Administration, Processing and
Disbursement Center, 14925 Kingsport
Road, Fort Worth, TX 76155.
FOR FURTHER INFORMATION CONTACT: A.
Escobar, Office of Disaster Assistance,
U.S. Small Business Administration,
409 3rd Street SW, Suite 6050,
Washington, DC 20416, (202) 205–6734.
SUPPLEMENTARY INFORMATION: Notice is
hereby given that as a result of the
SUMMARY:
President’s major disaster declaration on
02/23/2022, Private Non-Profit
organizations that provide essential
services of a governmental nature may
file disaster loan applications at the
address listed above or other locally
announced locations.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties: Adams, Buffalo, Burt,
Cass, Cuming, Fillmore, Gage,
Hamilton, Harlan, Jefferson,
Johnson, Kearney, Nemaha,
Nuckolls, Otoe, Pawnee, Platte,
Polk, Richardson, Saline, Sarpy,
Saunders, Thayer, Washington,
Webster.
The Interest Rates are:
[FR Doc. 2022–04356 Filed 3–1–22; 8:45 am]
BILLING CODE 8026–03–P
SMALL BUSINESS ADMINISTRATION
[Disaster Declaration #17356 and #17357;
IOWA Disaster Number IA–00110]
Presidential Declaration of a Major
Disaster for Public Assistance Only for
the State of Iowa
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
This is a Notice of the
Presidential declaration of a major
disaster for Public Assistance Only for
the State of Iowa (FEMA–4642–DR),
dated 02/23/2022.
Incident: Severe Storms, Straight-line
Winds, and Tornadoes.
Incident Period: 12/15/2021.
DATES: Issued on 02/23/2022.
Physical Loan Application Deadline
Date: 04/25/2022.
Economic Injury (EIDL) Loan
Application Deadline Date: 11/23/2022.
SUMMARY:
E:\FR\FM\02MRN1.SGM
02MRN1
]]>Agencies
[Federal Register Volume 87, Number 41 (Wednesday, March 2, 2022)]
[Notices]
[Pages 11787-11800]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2022-04332]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-94307; File No. S7-24-89]
Joint Industry Plan; Order Instituting Proceedings To Determine
Whether To Approve or Disapprove the Fifty-Second Amendment to the
Joint Self-Regulatory Organization Plan Governing the Collection,
Consolidation and Dissemination of Quotation and Transaction
Information for Nasdaq-Listed Securities Traded on Exchanges on an
Unlisted Trading Privileges Basis
February 24, 2022.
I. Introduction
On November 5, 2021,\1\ certain participants in the Joint Self-
Regulatory Organization Plan Governing the Collection, Consolidation
and Dissemination of Quotation and Transaction Information for Nasdaq-
Listed Securities Traded on Exchanges on an Unlisted Trading Privileges
Basis (``Nasdaq/UTP Plan'' or ``Plan'') \2\ filed with the Securities
and Exchange Commission (``SEC'' or ``Commission''), pursuant to
Section 11A of the Securities Exchange Act of 1934 (``Act'') \3\ and
Rule 608 of Regulation National Market System (``NMS'') thereunder,\4\
a proposal (the ``Proposed Amendment'') to amend the Nasdaq/UTP
Plan.\5\ The Proposed Amendment was published for comment in the
Federal Register on November 26, 2021.\6\
---------------------------------------------------------------------------
\1\ See Letter from Robert Books, Chair, UTP Operating
Committee, to Vanessa Countryman, Secretary, Commission (Nov. 5,
2021) (``Cover Letter'').
\2\ The Plan governs the collection, processing, and
dissemination on a consolidated basis of quotation information and
transaction reports in Eligible Securities for its Participants. The
Plan serves as the required transaction reporting plan for its
Participants, which is a prerequisite for their trading Eligible
Securities. See Securities Exchange Act Release No. 55647 (Apr. 19,
2007), 72 FR 20891 (Apr. 26, 2007).
\3\ 15 U.S.C 78k-1.
\4\ 17 CFR 242.608.
\5\ The Proposed Amendment was approved and executed by more
than the Plan's required two-thirds of the self-regulatory
organizations (``SROs'') that are participants of the UTP Plan. The
participants that approved and executed the amendment (the
``Participants'') are: Cboe BYX Exchange, Inc., Cboe BZX Exchange,
Inc., Cboe EDGA Exchange, Inc., Cboe EDGX Exchange, Inc., Cboe
Exchange, Inc., Nasdaq ISE, LLC, Nasdaq PHLX, Inc., The Nasdaq Stock
Market LLC, New York Stock Exchange LLC, NYSE American LLC, NYSE
Arca, Inc., NYSE Chicago, Inc., and NYSE National, Inc.. The other
SROs that are participants in the UTP Plan are: Financial Industry
Regulatory Authority, Inc., The Investors' Exchange LLC, Long-Term
Stock Exchange, Inc., MEMX LLC, MIAX PEARL, LLC, and Nasdaq BX, Inc.
\6\ See Securities Exchange Act Release No. 93618 (Nov. 19,
2021), 86 FR 67562 (Nov. 26, 2021) (``Notice''). Comments received
in response to the Notice are available at https://www.sec.gov/comments/s7-24-89/s72489.shtml.
---------------------------------------------------------------------------
This order institutes proceedings, under Rule 608(b)(2)(i) of
Regulation NMS,\7\ to determine whether to approve or disapprove the
Proposed Amendment or to approve the Proposed Amendment with any
changes or subject to any conditions the Commission deems necessary or
appropriate after considering public comment.
---------------------------------------------------------------------------
\7\ 17 CFR 242.608(b)(2)(i).
---------------------------------------------------------------------------
II. Summary of the Proposed Amendment 8
---------------------------------------------------------------------------
\8\ The full text of the Proposed Amendment appears as
Attachment A to the Notice. See Notice, supra note 6, 86 FR 67566-
68.
---------------------------------------------------------------------------
Under the Proposed Amendment, the Participants propose to amend the
Plan to adopt fees for the receipt of the expanded content of
consolidated market data pursuant to the Commission's Market Data
Infrastructure Rule (``MDI Rule'').\9\ The Participants have submitted
a separate amendment to implement the non-fee-related aspects of the
MDI Rule.\10\
---------------------------------------------------------------------------
\9\ See Securities Exchange Act Release No. 90610, 86 FR 18596
(April 9, 2021) (File No. S7-03-20) (``MDI Rule Release'').
\10\ See Securities Exchange Act Release No. 93620 (Nov. 19,
2021), 86 FR 67541 (Nov. 26, 2021).
---------------------------------------------------------------------------
The Participants propose a fee structure for the following three
categories of consolidated equity market data, which collectively
constitute the amended definition of core data, as that term is defined
in amended Rule 600(b)(21) of Regulation NMS: \11\
---------------------------------------------------------------------------
\11\ 17 CFR 242.600(b)(26).
---------------------------------------------------------------------------
(1) Level 1 Service, which would include Top of Book Quotations,
Last Sale Price Information, and odd-lot
[[Page 11788]]
information (as defined in amended Rule 600(b)(59)). Plan fees to
subscribers currently are for Top of Book Quotations and Last Sale
Price Information, as well as what is now defined as administrative
data (as defined in amended Rule 600(b)(2)), regulatory data (as
defined in amended Rule 600(b)(78)), and self-regulatory organization-
specific program data (as defined in amended Rule 600(b)(85)). The
Participants propose that the fees for Level 1 Service would remain
unchanged and that Level 1 Service would continue to include all
information that subscribers currently receive and would add odd-lot
information;
(2) Depth of book data (as defined in amended Rule 600(b)(26)); and
(3) Auction information (as defined in amended Rule 600(b)(5)).\12\
---------------------------------------------------------------------------
\12\ The Participants state that they propose to price subsets
of data that constitute core data separately so that data subscriber
users have flexibility in how much consolidated market data content
they wish to purchase. For example, the Participants state that they
understand that certain data subscribers may not wish to add depth-
of-book data or auction information, or may want to add only depth-
of-book information, but not auction information. Accordingly,
Participants are proposing to price subsets of data to provide
flexibility to data subscribers. However, the Participants state
that they expect that competing consolidators would purchase all
core data.
---------------------------------------------------------------------------
Professional and Nonprofessional Fee Structure
For each of the three categories of data described above, the
Participants propose a Professional Subscriber Charge and a
Nonprofessional Subscriber Charge.
With respect to Level 1 Service, the Participants do not propose to
change the Professional Subscriber and Nonprofessional Subscriber fees
currently set forth in the UTP Plan. Access to odd-lot information
would be made available to Level 1 Service Professional and
Nonprofessional Subscribers at no additional charge.
With respect to depth-of-book data, Professional Subscribers would
pay $99.00 per device per month, and Nonprofessional Subscribers would
pay $4.00 per subscriber per device per month. The Participants do not
propose at this time to offer per-quote packet charges or enterprise
rates for the use of depth-of-book data by either Professional
Subscribers or Nonprofessional Subscribers.
Finally, with respect to auction information, both Professional
Subscribers and Nonprofessional Subscribers would pay $10.00 per device
per month.
Non-Display Use Fees
The Participants propose Non-Display Use Fees relating to the three
categories of data described above: (1) Level 1 Service; (2) depth-of-
book data; and (3) auction information.
With respect to Level 1 Service, the Participants do not propose to
change the Non-Display Use fees currently set forth in the UTP Plan.
Access to odd-lot information would be made available to Level 1
Service subscribers at no additional charge.
With respect to non-display use of depth-of-book data, subscribers
would pay Non-Display Use Fees of $12,477.00 per month for each
category of Non-Display Use.
With respect to non-display auction information, subscribers would
pay Non-Display Use fees of $1,248.00 per month for each category of
Non-Display Use.
Access Fees
Finally, in addition to the charges described above, the
Participants propose to charge Access Fees to all subscribers for the
use of the three categories of data: (1) Level 1 Service; (2) depth-of-
book data; and (3) auction information.
With respect to Level 1 Service, the Participants do not propose to
change the Access Fees currently set forth in the UTP Plan. Access to
odd-lot information would be made available to Level 1 Service
subscribers at no additional charge.
With respect to depth-of-book data, subscribers would pay a monthly
Access Fee of $9,850.00.
With respect to auction information, subscribers would pay a
monthly Access Fee of $985.00 per Network.
Clarifications Related to Expanded Content
The Participants also propose to add clarifying language to the
fees for UTP services regarding the applicability of various fees to
the expanded market data content required by the MDI Rule.
First, the Participants propose to clarify that the Per Query Fee
will not apply to the expanded content, and will only be available for
the receipt and use of Level 1 Service. The Participants state that,
under the current Price List, the Per Query Fee serves as an
alternative fee schedule to the normally applied Professional and
Nonprofessional Subscriber Charges, and, further, that the proposed
changes are designed to clarify that Per Query Fee is only available
with respect to the use of Level 1 Service, and that the fees for the
use of depth-of-book data and auction information must be determined
pursuant to the Professional and Nonprofessional fees described above.
Second, the Participants propose to clarify that Level 1 Service
would include Top of Book Quotation Information, Last Sale Price
Information, odd-lot information, administrative data, regulatory data,
and self-regulatory organization program data. The Participants state
that this proposed amendment would use terms defined in amended Rule
600(b) to reflect both current data made available to data subscribers
and the additional odd-lot information that would be included at no
additional charge.
Third, the Participants propose to clarify that the existing
Redistribution Fees would apply to all three categories of core data
(i.e., Level 1, depth-of-book, and auction information), including any
subset thereof. According to the Participants, Redistribution Fees are
currently charged to any entity that makes last sale information or
quotation information available to any other entity or to any person
other than its employees, irrespective of the means of transmission or
access. The Participants propose to amend this description to make it
applicable to core data, as that term is defined in amended Rule
600(b)(21). The Participants do not propose to change the amount of the
Redistribution Fees themselves.
Fourth, the Participants propose that the existing Redistribution
Fees would be charged to competing consolidators. The Participants
argue (1) that the comparison the Commission made in the MDI Rule
Release between self-aggregators (which would not pay Redistribution
Fees) and competing consolidators is not appropriate in determining
whether a redistribution fee is not unreasonably discriminatory; and
(2) that the Participants do not believe that the Commission's
comparison is consistent with the current long-standing practice that
redistribution fees are charged to any entity that distributes data
externally.\13\ The Participants state
[[Page 11789]]
that a self-aggregator, by definition, would not be distributing data
externally and therefore would not be subject to such fees, which,
according to the Participants, is consistent with current practice that
a subscriber to consolidated data that only uses data for internal use
is not charged a Redistribution Fee.
---------------------------------------------------------------------------
\13\ The Participants state that the current exclusive
securities information processor (``SIP'') is not charged a
Redistribution Fee. The Participants state, however, that unlike
competing consolidators, the processor has been retained by the UTP
Plan to serve as an exclusive SIP, is subject to oversight by both
the UTP Plan and the Commission, and neither pays for the data nor
engages with data subscriber customers. The Participants state that,
by contrast, under the competing consolidator model, the UTP Plan
would have no role in either oversight of or determining which
entities choose to be a competing consolidator, a competing
consolidator would need to purchase consolidated market data just as
any other vendor would, and competing consolidators would be
responsible for competing for data subscriber clients. Accordingly,
the Participants argue that competing consolidators would be more
akin to vendors than the current exclusive SIPs. The Participants
state that if any entity that is currently an exclusive SIP chooses
to register as a competing consolidator, such entity would be
subject to the Redistribution Fee.
---------------------------------------------------------------------------
The Participants state that the more appropriate comparison would
be between competing consolidators and downstream vendors, both of
which would be selling consolidated market data directly to market data
subscribers. The Participants state that vendors are and still would be
subject to Redistribution Fees when redistributing data to market data
subscribers, and that it would be unreasonably discriminatory for
competing consolidators--which would be competing with downstream
market data vendors for the same data subscriber customers--to not be
charged a Redistribution Fee for exactly the same activity. The
Participants argue that, consequently, it would be unreasonably
discriminatory and would impose a burden on competition to not charge
competing consolidators the Redistribution Fee.\14\
---------------------------------------------------------------------------
\14\ The Participants argue that it would be more appropriate to
compare competing consolidators and self-aggregators with respect to
the fees charged for receipt and use of market data from the
Participants and to address the fees for the usage of consolidated
market data based on their actual usage, which, the Participants
argue, is consistent with the statutory requirements of the Act that
the data be provided on terms that are not unreasonably
discriminatory. The Participants state that, for instance,
Participants have proposed to charge a data access fee to competing
consolidators that would be the same fee to self-aggregators.
---------------------------------------------------------------------------
Third, the Participants state that the UTP Plan fee schedule
currently permits the redistribution of UTP Level 1 Service on a
delayed basis for $250.00 per month. The Participants propose adding a
statement that depth-of-book data and auction information may not be
redistributed on a delayed basis.
Finally, the Participants propose to make non-substantive changes
to language in the fee schedules to take into account the expanded
content. For example, the Participants propose updating various fee
descriptions to either add or remove a reference to UTP Level 1
Service. Additionally, the Participants state that, while FINRA OTC
Data will not be provided to competing consolidators, it is still being
provided to the UTP Processor for inclusion in the consolidated market
data made available by the UTP Processor. Accordingly, the Participants
propose adding clarifying language to make clear that UTP Level 1
Service obtained from the Processor will include FINRA OTC Data but
will not include odd-lot information.
III. Summary of Comments
The Commission has received 16 comment letters on the Proposed
Amendment.\15\ Fourteen commenters object to the Proposed
Amendment,\16\ and two commenters support the Proposed Amendment.\17\
---------------------------------------------------------------------------
\15\ See Letters to Vanessa Countryman, Secretary, Commission
from Hope M. Jarkowski, General Counsel, NYSE Group, Inc. (Jan. 22,
2022) (``NYSE Letter''); Christopher Solgan, Senior Counsel, MIAX
Exchange Group (Jan.12, 2022) (``MIAX Letter''); Emil Framnes and
Simon Emrich, Norges Bank Investment Management (Jan. 5, 2022)
(``NBIM Letter''); James Angel, Ph.D., CFP, CFA, Associate Professor
of Finance, Georgetown University (Dec. 21, 2021) (``Angel
Letter''); Luc Burgun, President and CEO, NovaSparks S.A.S. (Dec.
17, 2021) (``NovaSparks Letter''); Joe Wald, Managing Director, Co-
Head of Electronic Trading, BMO Capital Markets Group, BMO Capital
Markets and Ray Ross, Managing Director, Co-Head of Electronic
Trading, BMO Capital Markets Group (Dec. 17, 2021) (``BMO Letter'');
Erika Moore, Vice President and Corporate Secretary, Nasdaq Stock
Market LLC (Dec. 17, 2021) (``Nasdaq Letter''); John Ramsay, Chief
Market Policy Officer, Investors Exchange LLC (Dec. 17, 2021) (``IEX
Letter''); Ellen Greene, Managing Director, Equity & Options Market
Structure, Securities Industry and Financial Markets Association and
William C. Thum, Managing Director and Associate General Counsel,
Asset Management Group, Securities Industry and Financial Markets
Association (Dec. 17, 2021) (``SIFMA Letter''); Marcia E. Asquith,
Executive Vice President, Board and External Relations, Financial
Industry Regulatory Authority, Inc. (Dec. 17, 2021) (``FINRA
Letter''); Patrick Flannery, Chief Executive Officer, MayStreet
(Dec. 17, 2021) (``MayStreet Letter''); Hubert De Jesus, Managing
Director, Global Head of Market Structure and Electronic Trading,
BlackRock and Samantha DeZur, Director, Global Public Policy,
BlackRock (Dec. 16, 2021) (``BlackRock Letter''); Jonathan Hill,
CEO, Cutler Group, LP Anand Prakash, CTO, Cutler Group, LP Nader
Sharabati, CFO, Cutler Group, LP and Doug Patterson, CCO, Cutler
Group, LP (Dec. 16, 2021) (``Cutler Letter''); Quinton Pike, CEO,
Polygon.io, Inc. (Nov. 30, 2021) (``Polygon.io Letter''); Allison
Bishop, President, Proof Services LLC (Nov. 22, 2021) (``Proof
Letter''); Adrian Griffiths, Head of Market Structure, MEMX LLC,
(Nov. 8, 2021) (``MEMX Letter'').
\16\ See MIAX Letter, supra note 15; NBIM Letter, supra note 15;
Angel Letter, supra note 15; NovaSparks Letter, supra note 15; BMO
Capital Letter, supra note 15; IEX Letter, supra note 15; SIFMA
Letter, supra note 15; FINRA Letter, supra note 15; MayStreet
Letter, supra note 15; BlackRock Letter, supra note 15; Cutler
Letter, supra note 15; Polygon.io Letter, supra note 15; Proof
Letter, supra note 15; MEMX Letter, supra note 15.
\17\ See Nasdaq Letter, supra note 15; NYSE Letter, supra note
15.
---------------------------------------------------------------------------
A. Comments Regarding the Methodology Used To Justify the Proposed Fees
Some commenters oppose the Proposed Amendment, arguing that the
proposed fees are based on a flawed methodology that, inconsistent with
the MDI Rule Release, fails to provide a cost-based justification.\18\
These commenters state that the proposal should bear a reasonable
relationship to the cost of producing the market data, which, they
argue, is the primary basis the Commission has identified for
justifying the prices for core data fees.\19\
---------------------------------------------------------------------------
\18\ See MIAX Letter, supra note 15, at 3; IEX Letter, supra
note 15, at 2-3. See also BMO Letter, supra note 15, at 2-3; SIFMA
Letter, supra note 15, at 4-5 (noting that the fees charged by
monopolistic providers, such as exclusive SIPs, to be tied to some
type of cost-based standard in order to preclude excessive profits
if fees are too high or underfunding or subsidization if fees are
too low); MayStreet Letter, supra note 15, at 6; BlackRock Letter,
supra note 15, at 2; Proof Letter, supra note 15, at 2, 3; MEMX
Letter, supra note 15, at 18.
\19\ See IEX Letter, supra note 15, at 1, 2-3 (stating that the
proposal fails to establish that the fees for the data content
underlying consolidated market data meet the statutory standards of
being fair, reasonable, and not unreasonably discriminatory); MIAX
Letter, supra note 15, at 3. See also BMO Letter, supra note 15, at
2-3; SIFMA Letter, supra note 15, at 4-5 (noting that the fees
charged by monopolistic providers, such as exclusive SIPs, need to
be tied to some type of cost-based standard in order to preclude
excessive profits if fees are too high or underfunding or
subsidization if fees are too low); MayStreet Letter, supra note 15,
at 6; BlackRock Letter, supra note 15, at 2; Proof Letter, supra
note 15, at 2, 3; MEMX Letter, supra note 15, at 18.
---------------------------------------------------------------------------
Some commenters also state that the methodology used has resulted
in proposed fees that are unreasonably high.\20\ In making this
argument, some commenters object to using the current prices for the
exchanges' proprietary data products as the basis for calculating the
proposed core data fees,\21\ stating that such a method is inconsistent
with the MDI Rule's goal of expanding access to consolidated data \22\
and with statements in the MDI Rule Release that the proposed fees
should bear a reasonable relationship to the cost of producing the
data.\23\
---------------------------------------------------------------------------
\20\ See MIAX Letter, supra note 15, at 3; MayStreet Letter,
supra note 15, at 6; BlackRock Letter, supra note 15, at 2, 4-5; IEX
Letter, supra note 15, at 4; Proof Letter, supra note 15, at 3; MEMX
Letter, supra note 15, at 8, 11-12.
\21\ See MIAX Letter, supra note 15, at 4; SIFMA Letter, supra
note 15, at 4, 5; IEX Letter, supra note 15, at 4.
\22\ See MIAX Letter, supra note 15, at 4.
\23\ See MIAX Letter, supra note 15, at 3; SIFMA Letter, supra
note 15, at 4, 5; IEX Letter, supra note 15, at 1, 2-3.
---------------------------------------------------------------------------
Some commenters also state that they disagree with the
Participants' views in the proposal that a cost-based justification is
not required because the Act does not require a showing of costs and
that cost analysis has not been provided in past equity market data
plan proposals.\24\ These commenters state that the Commission has
stated that a reasonable relation to cost is a
[[Page 11790]]
primary basis for justifying core data fees.\25\ One commenter states
that specific information, including quantitative information, should
be provided to support the Participants' claims that the proposed fee
is fair and reasonable because it will permit the recovery of SRO costs
or will not result in excessive pricing or profits.\26\ Additionally,
some commenters state that they disagree with the Participants'
statement in the proposal that the Plan's Operating Committee ``has no
knowledge of any costs associated with consolidated market data,''
stating that Participants know how much it costs to collect and
disseminate market data because they already perform this function,
including in connection with proprietary feeds.\27\
---------------------------------------------------------------------------
\24\ See MIAX Letter, supra note 15, at 3; SIFMA Letter, supra
note 15, at 5;
\25\ See IEX Letter, supra note 15, at 1, 2-3; SIFMA Letter,
supra note 15, at 5; MIAX Letter, supra note 15, at 3 (noting that
the vast majority of such equity market data plan fees were adopted
prior to issuance of the Commission's staff fee guidance, and
multiple SROs have more recently included cost based analysis when
proposing fees for a market data product).
\26\ See MIAX Letter, supra note 15, at 3.
\27\ See SIFMA Letter, supra note 15, at 5; MIAX Letter, supra
note 15, at 3; MayStreet Letter, supra note 15, at 6.
---------------------------------------------------------------------------
One commenter states that a demonstration of costs is not required
because neither the Exchange Act nor Commission rules requires that
market data fees to be supported by a showing of costs.\28\ The
commenter stated that the Commission's standard for evaluating
consolidated market data fees has not required a showing of the
relationship between the proposed fees and the cost of producing the
data, as illustrated by past equity market data plan proposals for
consolidated market data fees which the commenter states were not
justified on the basis of cost.\29\
---------------------------------------------------------------------------
\28\ See NYSE Letter, supra note 15, at 3 (stating that the
legislative history of the 1975 amendments to the Exchange Act, and
particularly Section 11A, reflects that Congress's principal concern
was promoting competition between exchanges, not regulating market
data pricing; and that economic studies have demonstrated that
separating out the costs of producing market data from the other
costs of operating an SRO is an impossible task that would enmesh
the Commission in a continuous ratemaking process that would produce
arbitrary results).
\29\ See id. at 3-4.
---------------------------------------------------------------------------
This commenter argues that it is not clear how the Plan could
support the fee proposals based on costs because the Operating
Committee plays no role in the creation or dissemination of core data
under amended Rule 603(b), and thus has no information about how each
exchange would generate core data under that rule.\30\ The commenter
states that, in its view, it remains impossible to separate the costs
of producing market data from other costs of operating an exchange.\31\
---------------------------------------------------------------------------
\30\ See id. at 4.
\31\ See id.
---------------------------------------------------------------------------
Another commenter opposes the use of cost as a basis for setting
the proposed fees.\32\ This commenter dismisses other commenters'
suggestions that fees should be based on costs, rather than value,
because, according to the commenter, the Commission has not offered
guidance with respect to such a cost-based ratemaking system,\33\ and
because any cost allocation between joint products would therefore be
unworkable, inherently arbitrary, and inconsistent with the
Congressional mandate that the Commission rely on competition whenever
possible in meeting its regulatory responsibilities.\34\ The commenter
states that the proposed fees have been tested by competition and that
``Commission staff have indicated that they would look at factors
beyond the competitive environment, such as cost, only if a `proposal
lacks persuasive evidence that the proposed fee is constrained by
significant competitive forces.' '' \35\
---------------------------------------------------------------------------
\32\ See Nasdaq Letter, supra note 15, at 3.
\33\ See id.
\34\ See id.
\35\ See id. at 5-6 (citing to ``Staff Guidance on SRO Rule
Filings Relating to Fees'' (May 19, 2019), available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees). The Staff
Guidance on SRO Rule Filings Relating to Fees in fact states: ``If a
Fee Filing proposal lacks persuasive evidence that the proposed fee
is constrained by significant competitive forces, the SRO must
provide a substantial basis, other than competitive forces,
demonstrating that the fee is consistent with the Exchange Act. One
such basis may be the production of related revenue and cost data,
as discussed further below.'' See ``Staff Guidance on SRO Rule
Filings Relating to Fees'' (May 19, 2019), available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees.
---------------------------------------------------------------------------
Some commenters oppose the use of the value-based methodology used
to determine the fees under the Proposed Amendment.\36\ One commenter
states that if the objective is to have the SIPs provide a service that
is more affordable and accessible than the data products offered by
individual exchanges, then ``value to subscribers'' should not be sole
determinant of SIP fees because the current fees for exchange
proprietary data products are not a reasonable gauge of the value of
core data offered under the Plan.\37\ One commenter states that basing
the proposed pricing of the Plans' fees on the proprietary feeds
pricing does not seem appropriate because exchange proprietary data
feeds are complements to consolidated market data feeds for latency-
sensitive market participants; \38\ less-latency sensitive market
participants find consolidated market data more useful than the
propriety data feeds; \39\ and latency-sensitive market participants
will not view consolidated market data under the Plans to be a credible
substitute for the proprietary data feeds even after the MDI Rule
reforms are implemented.\40\ Another commenter states that basing the
proposed fees on value instead of cost does not work because the
mandate under the Exchange Act is to price SIP data at levels that
maximize its availability.\41\
---------------------------------------------------------------------------
\36\ See Proof Letter, supra note 15; NBIM Letter, supra note
15; MayStreet Letter, supra note 15.
\37\ See Proof Letter, supra note 15, at 3.
\38\ See NBIM Letter, supra note 15, at 1-2.
\39\ See id. at 2.
\40\ See id. at 2.
\41\ See MayStreet Letter, supra note 15, at 6.
---------------------------------------------------------------------------
Two commenters argue that the proposed fees are fair and reasonable
and not unreasonably discriminatory because they are reasonably related
to the value that subscribers gain from the data, and achieve the
Commission's objective in Regulation NMS that prices for consolidated
market data be set by market forces.\42\ One commenter argues that the
pricing for exchange proprietary data feeds, including the depth-of-
book data, top-of-book data, and auction information on which the
proposed fees are based, is constrained by competitive forces, in that
they have a history of being constrained by direct competition and by
platform competition among the exchanges.\43\ This commenter states
that the pricing for exchange proprietary data feeds is constrained by
the highly competitive markets for exchange trading and exchange market
data.\44\ It states that the proposed fees meet the Commission's
objective for market forces to determine the overall level of fees.\45\
---------------------------------------------------------------------------
\42\ See NYSE Letter, supra note 15, at 5; Nasdaq Letter, supra
note 15, at 5.
\43\ See NYSE Letter, supra note 15, at 5.
\44\ See id. The commenter further argues that exchanges compete
against each other as platforms, and that, as such, no exchange can
raise its prices to supracompetitive levels on one side of the
platform, such as market data, without losing sales on the other,
such as trading volume. The commenter argues that given this inter-
exchange platform competition, the exchanges' filed prices for
depth-of-book data and auction information are constrained by market
forces. See id. at 6-7.
\45\ See id. at 5. The commenter stated that by applying that
established ratio to the current prices for consolidated top-of-book
data, the fee proposals thus reflect the market forces that drive
the pricing of depth-of-book information in relation to top-of book
information and the value that the data has to market participants.
Id. The ratio between such filed proprietary depth-of-book fees and
proprietary top-of-book data therefore provides the Commission with
a benchmark for evaluating the proposed fees, which NYSE argues are
fair, reasonable, and not unfairly discriminatory because they are
based on this ratio, which is reflective of market forces. See id.
at 7.
---------------------------------------------------------------------------
[[Page 11791]]
This commenter also argues that basing fees on the value of the
underlying data is the fairest and most economically efficient method
for setting fees because setting fees according to the value of the
data leads to optimal consumption: Fees that are too low do not allow
for producers to remain profitable, while fees that are too high lead
to underutilization.\46\ The commenter states that NMS Plans have
historically used value as a fair and efficient basis for setting
fees.\47\ The commenter argues that the best basis for determining the
value of core data are the fees currently charged for proprietary data
fees, which, according to the commenter, have been ``tested by
competitive forces'' and therefore provide a good starting point for
estimating the value of new core data and for setting fees at efficient
levels.\48\ The commenter argues that the value-based methodology
provides a substantial basis for showing that current proprietary
fees--and, by extension, the proposed fees for new core data--are
equitable, fair, reasonable, and not unreasonably discriminatory.\49\
The commenter states that exchanges cannot overprice the total prices
of their services without potentially losing order flow and damaging
its overall ability to compete.\50\According to this commenter,
exchanges that produce more valuable market data generally charge
higher fees, and those with less valuable data charge lower fees,\51\
so fees vary according to the underlying value of the data, as measured
by the liquidity available at the exchange.\52\
---------------------------------------------------------------------------
\46\ See Nasdaq Letter, supra note 15, at 2.
\47\ See id.
\48\ See id. at 2, 6.
\49\ See id. at 6.
\50\ See id. at 4.
\51\ See id.
\52\ See id.
---------------------------------------------------------------------------
The commenter argues that 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 discriminatory.\53\ The commenter states that Commission
staff has indicated that they would look at factors beyond the
competitive environment, such as cost, only if a proposal lacks
persuasive evidence that the proposed fee is constrained by significant
competitive forces.\54\ The commenter argues that, because they are
tested by market competition, proprietary data fees provide good and
indicative starting point for estimating the value of new core data and
setting fees at their efficient level.\55\ This, according to the
commenter, provides a substantial basis for showing that current
proprietary fees--and, by extension, the proposed fees for new core
data--are equitable, fair, reasonable, and not unreasonably
discriminatory.\56\
---------------------------------------------------------------------------
\53\ See id. at 5-6.
\54\ See id. (citing to ``Staff Guidance on SRO Rule Filings
Relating to Fees'' (May 19, 2019), available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees).
\55\ See id. at 6.
\56\ See id.
---------------------------------------------------------------------------
Some commenters object to the way in which the Participants used
the fees of proprietary depth-of-book products to calculate a ratio (or
multiplier) between those fees and the fees for proprietary top-of-book
products and then multiplied existing SIP core top-of-book data fees by
that multiplier to calculate the proposed depth-of-book fees for
expanded core data under the MDI Rule.\57\ One commenter argues that
the approach adopted is arbitrary because it presupposes that the fees
exchanges charge for their proprietary market data are fair and
reasonable.\58\ One commenter states that calculating the proposed fee
levels in this manner--based on prices charged by the exchanges for
their existing market data product--is not the right starting point for
setting the proposed fees and inconsistent with the MDI Rule's goal of
expanding access to consolidated data.\59\ One commenter states that
that the exchanges' ``platform competition'' argument that competition
for order flow constrains pricing for market data does not demonstrate
that the fees are reasonable and mentions studies it has submitted to
the Commission in the past that bolster their argument.\60\
---------------------------------------------------------------------------
\57\ See MIAX Letter, supra note 15, at 4; SIFMA Letter, supra
note 15, at 5.
\58\ See SIFMA Letter, supra note 15, at 5.
\59\ See MIAX Letter, supra note 15, at 4.
\60\ See SIFMA Letter, supra note 15, at 5-6.
---------------------------------------------------------------------------
Some commenters argue that the methodology used to calculate the
fees does not account for the transfer of costs from the SROs to market
participants under the decentralized consolidation model.\61\ One
commenter states that, while the proposal leaves fees for existing core
data elements unchanged, the profits and operating costs of the
exclusive securities information processors should be deducted from
these fees to reflect the new role of competing consolidators.\62\
---------------------------------------------------------------------------
\61\ See MEMX Letter, supra note 15, at 18; MIAX Letter, supra
note 15, at 2; BlackRock Letter, supra note 15, at 2-3; Polygon.io
Letter, supra note 15, at 1. On the other hand, one commenter stated
that with respect to comments that the proposal should ``back out''
fees for the current Processors from the proposed fee structure, the
MDI Rule requires the current Processors to continue operating for
at least several more years, and that therefore, there are no
savings to back out of any proposed fee structure at this time. See
NYSE Letter, supra note 15, at 7.
\62\ See BlackRock Letter, supra note 15, at 2, 3-4.
---------------------------------------------------------------------------
B. Comments Regarding the Proposed Fees
1. General Comments
Some commenters state the methodology used to calculate the
proposed fees resulted in fees that are too high.\63\ Some commenters
state that the proposed fees have not been shown to be fair and
reasonable and not unreasonably discriminatory.\64\ One commenter
states that the proposed fees for the content underlying consolidated
market data are too high whether a cost-basis or value-basis were used
as a justification by the Participants.\65\ This commenter states that
the cost of SIP data is too high relative to top-of-book proprietary
feeds, and that market participants are currently choosing the less
expensive option of top-of-book proprietary feeds,\66\ which, according
to the commenter, indicates that Level 1 consolidated market data is
not priced in accordance with its value to the market.\67\ Another
commenter challenges the methodology and compares the proposed fees to
fees currently charged for proprietary data fees and the proposed user
and access fees for consolidated market data under the proposal to the
prices that a firm would pay to obtain that data from
[[Page 11792]]
proprietary data products that offer similar information.\68\ This
commenter believes that at any given price a subscriber would be better
off subscribing to the proprietary data fees listed instead of
purchasing consolidated market data from the SIPs given the additional
information included on those feeds.\69\ The commenter states that,
because the proposed fees are generally more expensive than current
proprietary data offering, the Proposed Amendments clearly fail the
``fair and reasonable'' test required by the Exchange Act.\70\
---------------------------------------------------------------------------
\63\ See BlackRock Letter, supra note 15, at 1-5; FINRA Letter,
supra note 15, at 7; MIAX Letter, supra note 15, at 2; Angel Letter,
supra note 15, at 9; NovaSparks Letter, supra note 15, at 1; BMO
Letter, supra note 15, at 2-3; IEX Letter, supra note 15, at 1, 5;
SIFMA Letter, supra note 15, at 1, 4-5; IEX Letter, supra note 15,
at 4; MEMX Letter, supra note 15, at 11-12.
\64\ See IEX Letter, supra note 15, 1, at 2-3; MIAX Letter,
supra note 15, at 2; MEMX Letter, supra note 15, at 22; SIFMA
Letter, supra note 15, at 4-5; BMO Letter, supra note 15, at 3;
FINRA Letter, supra note 15, at 7; MayStreet Letter, supra note 15,
at 4; BlackRock Letter, supra note 15, at 2, 6; Polygon.io Letter,
supra note 15, at 2.
\65\ See MayStreet Letter, supra note 15, at 6. This commenter
states that the cost of SIP data is too high relative to top-of-book
proprietary feeds, and that market participants are currently
choosing the less expensive option of top-of-book proprietary feeds,
which, according to the commenter, indicates that Level 1
consolidated market data is not priced in accordance with its value
to the market. See id.
\66\ See MayStreet Letter, supra note 15, at 6-7.
\67\ See id. at 7. The commenter states that Level 1 data should
be priced so as to make the content available at a price that is
competitive to proprietary top-of-book offerings, and that the fact
that the price levels are unchanged from the current SIP prices
reflects a failure by the Participants to accurately assess the
value of Level 1 data. The commenter states that the value of the
depth-of-book data should focus on greater access and availability
of this kind of data, and adds that the Operating Committee should
consider what price point would increase availability of depth-of-
book information, rather than charging a multiplier of proprietary
data feeds. See id.
\68\ See MEMX Letter, supra note 15, at 6.
\69\ See id. at 7.
\70\ See id. at 8.
---------------------------------------------------------------------------
Some commenters state that the proposed fees would have an adverse
impact on competition, and on competing consolidators in
particular.\71\ One commenter states that, even where the proposed fees
are lower than the fees charged for comparable proprietary data, the
fact that other fees are higher than proprietary offerings is likely to
reduce incentives for competing consolidators to actually offer that
data content to their customers.\72\ Another commenter expresses
concern that if the Proposed Amendment were approved the exchanges
would entrench a high level of cost for market data that has no
relation to their underlying expenses, is not subject to effective
competitive forces, and serves as an formidable barrier to entry for
newer firms.\73\
---------------------------------------------------------------------------
\71\ See MIAX Letter, supra note 15, at 1, 3; 4; MEMX Letter,
supra note 15, at 2, 9; 15-17, 21-22, 25; NBIM Letter, supra note
15, at 2; NovaSparks Letter, supra note 15, at 1; IEX Letter, supra
note 15, at 5; SIFMA Letter, supra note 15, at 8; FINRA Letter,
supra note 15, at 5; MayStreet Letter, supra note 15, at 5;
BlackRock Letter, supra note 15, at 1-4; Polygon.io Letter, supra
note 15, at 3; Proof Letter, supra note 15, at 3; Cutler Letter,
supra note 15, at 1.
\72\ See MEMX Letter, supra note 15, at 9. The commenter further
argues that it is unlikely that there will be any demand for the new
data elements included in consolidated market data at prices that
exceed the fees charged for proprietary data feeds today. This, the
commenter argues, would limit the potential customer base for
competing consolidators and inappropriately impede the viability of
competing consolidators under the infrastructure rule. See MEMX
Letter, supra note 15, at 17.
\73\ See Proof Letter, supra note 15, at 1.
---------------------------------------------------------------------------
One commenter states that the Proposed Amendment conflates the
prices that competing consolidators and self-aggregators pay the SROs
for the underlying NMS information, and the prices that competing
consolidators would charge for the consolidated data they generate.\74\
This commenter believes the proposals do not make clear that the
proposed fees are for the content underlying the consolidated market
data, as opposed to the consolidated market data itself.\75\ The
commenter argues that the Participants confuse the content of
consolidated market data and the consolidated market data itself,\76\
and states that the Proposed Amendment sets prices at levels that the
SIPs currently charge for consolidated market data.\77\
---------------------------------------------------------------------------
\74\ See MayStreet Letter, supra note 15, at 2.
\75\ See id.
\76\ See id. at 3.
\77\ See id. at 6.
---------------------------------------------------------------------------
One commenter believes that any analysis of current SIP fees should
include a discussion of what structural changes could be made to SIP
fees to eliminate or reduce the incentives that firms have today to
avoid providing SIP data to their customers.\78\ One commenter believes
that the current proposal will favor current market data vendors who
already pay for these fees and have large customer bases, but will not
necessarily use the most efficient data consolidation solutions.\79\
This commenter believes that all of the equity market data plans should
have a unified feed and price list because most end users today consume
all of the plans' feeds.\80\ Another commenter states it supports the
proposed a la carte fee structure for the expanded elements of
consolidated data because, in the commenter's view, market participants
should be able to select from a variety of market data products and pay
only for the content they consume.\81\
---------------------------------------------------------------------------
\78\ See MEMX Letter, supra note 15, at 20.
\79\ See NovaSparks Letter, supra note 15, at 1.
\80\ See id. at 1-2.
\81\ See BlackRock Letter, supra note 15, at 2-3.
---------------------------------------------------------------------------
2. Fees for Top-of-Book Data
Some commenters believe that the proposed fees for Level 1 core
data, which include expanded content to include odd-lot quotations, are
too high.\82\
---------------------------------------------------------------------------
\82\ See NovaSparks Letter, supra note 15; IEX Letter, supra
note 15; MayStreet Letter, supra note 15; BlackRock Letter, supra
note 15; MIAX Letter, supra note 15.
---------------------------------------------------------------------------
One commenter states that the proposed fees for top-of-book data
should be substantially lower to allow competing consolidators to
operate their business.\83\ This commenter states that exchanges will
no longer have to pay for the current processors and will not have the
burden of maintaining custom feeds in specific formats since the
proprietary data feeds would be used by the competing consolidators to
distribute the new SIP market data.\84\
---------------------------------------------------------------------------
\83\ See NovaSparks Letter, supra note 15, at 1.
\84\ See id.
---------------------------------------------------------------------------
One commenter states that the net effect of the proposal is to make
core data fees more expensive that proprietary data feeds, adding that
it seems clear the purpose of the proposal is ``to protect existing
proprietary market data fee revenues by making market data from
competing consolidators prohibitively expensive and their business non-
viable.'' \85\ Another commenter states that the cost of SIP data is
too high relative to top-of-book proprietary feeds and that market
participants are choosing the less expensive option of top-of-book
proprietary feeds.\86\ This commenter believes this indicates that
Level 1 consolidated market data is not priced in accordance with its
value to the market.\87\ According to the commenter, Level 1 data
should be priced as to make the content available at a price that is
competitive to proprietary top-of-book offerings.\88\ This commenter
further states that the fact that the price levels are unchanged from
the current SIP prices reflects a failure by the Participants to
accurately assess the value of Level 1 data.\89\ Another commenter
opposes the proposal and asks the Commission disapprove it as it
represents an overall increase in costs, including access fees, to end
users as well as competing consolidators, thereby making market data
less accessible and putting competing consolidators at a
disadvantage.\90\
---------------------------------------------------------------------------
\85\ See IEX Letter, supra note 15, at 5.
\86\ See MayStreet Letter, supra note 15, at 6-7.
\87\ See id. at 7.
\88\ See id.
\89\ See id.
\90\ See Cutler Letter, supra note 15, at 1-2.
---------------------------------------------------------------------------
One commenter supports certain aspects of the proposal, including
its a la carte fee structure, and the inclusion of odd-lot quotations
free of charge.\91\ Moreover, some commenters expressed support for the
proposed inclusion of odd-lot information free of charge in the
expanded Level 1 core data,\92\ with one commenter stating that this
would result in top-of-book information that is more comprehensive,
which should, in turn, strengthen best execution and enhance
transparency and price discovery.\93\
---------------------------------------------------------------------------
\91\ See BlackRock Letter, supra note 15, at 1, 3.
\92\ See MIAX Letter, supra note 15, at 2; BlackRock Letter,
supra note 15, at 1, 3; MayStreet Letter, supra note 15, at 2, 3, 6.
\93\ See BlackRock Letter, supra note 15, at 1, 3.
---------------------------------------------------------------------------
One commenter states that the proposed Level 1 core data fees
should be adjusted to reflect the new role of competing
consolidators.\94\ The commenter states that the MDI Rule fundamentally
alters the ecosystem for market data by transitioning from exclusive
SIPs to competing consolidators and that the Commission intended that
this change would unbundle the data fees for consolidated
[[Page 11793]]
market data from the fees for its consolidation and distribution
because the prospective fees charged by competing consolidators would
now include fees for aggregation of consolidated market data products
and transmission of such products to subscribers.\95\ This commenter
states that in leaving fees for existing core data elements unchanged,
the Proposed Amendment fails to consider, as the Commission stated in
the MDI Rule Release, that the effective national market system plan
for NMS stocks will no longer be operating an exclusive SIP or
performing aggregation and other operational functions.\96\ The
commenter argues that the proposed fees should not have been left
unchanged from existing core data elements fees, but rather, should
have been reduced by at least 4%--the estimated SIP operating expenses
excluding profits--to reflect the new role of competing consolidators,
and deduct both SIP profits and operating costs from the price.
According to the commenter, this 4% discount is derived directly from
Commission estimates of SIP operating expenses ($16 million) and
revenues ($390 million) in 2018 without any consideration of possible
profits. The commenter adds that exclusive SIP profits should also be
subtracted from the proposed fees for core data content, as ``any
markup for consolidation services should transition to be within the
purview of competing consolidators.'' \97\ According to the commenter,
keeping core data fees the same as the proposal purports to do would
effectively ``opaquely raise prices'' for this data content.\98\
---------------------------------------------------------------------------
\94\ See id. at 2-4.
\95\ See id. at 3-4.
\96\ See id. (citing to MDI Rule Release, 86 FR at 18685).
\97\ See id. at 4, note 12.
\98\ See id. at 4.
---------------------------------------------------------------------------
3. Fees for Depth-of-Book Data
Some commenters argue that the calculation used by the Participants
to determine the proposed depth-of-book fees is flawed and inconsistent
with the MDI Rule Release because the calculation uses exchange
proprietary data feeds that include full order-by-order depth-of-book,
inclusive of top-of-book information, rather than the more limited
depth information prescribed by the MDI Rule Release.\99\ These
commenters point out that while the proprietary market data depth-of-
book feeds used to calculate fees for the consolidated depth-of-book
information include top-of-book data as part of those offerings, fees
for the consolidated depth-of-book data product under the proposal do
not include top-of-book.\100\ Consequently, some commenters argue,
subscribers to the new core data would need to pay an additional
surcharge to receive top-of-book data at current rates to obtain the
same data content that is available today through proprietary
feeds.\101\
---------------------------------------------------------------------------
\99\ See IEX Letter, supra note 15, at 3-4; MEMX Letter, supra
note 15, at 11-12. BlackRock Letter, supra note 15, at 4-5; FINRA
Letter, supra note 15, at 6.
\100\ See id.
\101\ See IEX Letter, supra note 15, at 4; MEMX Letter, supra
note 15, at 6, 11-12; BlackRock Letter, supra note 15, at 4-5.
---------------------------------------------------------------------------
Some commenters question the determination of the ratio (or
multiplier) used by the Participants to set the depth-of-book
feeds.\102\ One commenter states that fees for depth-of-book
information ``should be adjusted to use a multiplier of 2.94x to
eliminate the overcharging from double counting top of book data;
otherwise, those who subscribe to both Level 1 and depth of book data
``would be paying twice for top of book content.'' \103\
---------------------------------------------------------------------------
\102\ See IEX Letter, supra note 15; MEMX Letter, supra note 15;
BlackRock Letter, supra note 15; FINRA Letter, supra note 15; Angel
Letter, supra note 15; NovaSparks Letter, supra note 15.
\103\ See BlackRock Letter, supra note 15, at 4-5. See also IEX
Letter, supra note 15, at 4; MEMX Letter, supra note 15, at 6, 11-
12.
---------------------------------------------------------------------------
Some commenters state that an additional problem with the adopted
approach is that the proprietary depth-of-book products, such as those
used in the calculation, are primarily structured as comprehensive
order-by-order feeds, which do not aggregate orders at each price
level.\104\ According to these commenters, the depth-of-book elements
prescribed by the MDI Rule warrant a lower price because they prescribe
only the aggregated quotes available at the next five prices beyond the
NBBO and thus include much less content than these proprietary
feeds.\105\ One commenter states that complete, order-by-order depth-
of-book feeds, such as those used in the calculation, are likely to be
associated with ``additional operational costs because of increased
message traffic with order by order data at all price levels.\106\
Accordingly, the commenter argues that an aggregated feed with only
five levels of depth should have been priced at a discount relative to
the corresponding exchange offerings to compensate for differences in
both information content and costs.\107\ One commenter argues that the
proposal fails to consider pricing for other proprietary data feeds
that are aggregated by price level and would therefore serve as a more
logical proxy for setting core data fees.\108\
---------------------------------------------------------------------------
\104\ See IEX Letter, supra note 15, at 4; MEMX Letter, supra
note 15, at 11-12; BlackRock Letter, supra note 15, at 4-5; FINRA
Letter, supra note 15, at 6.
\105\ See IEX Letter, supra note 15, at 4; MEMX Letter, supra
note 15, at 11-12. BlackRock Letter, supra note 15, at 4-5.
\106\ See BlackRock Letter, supra note 15, at 4-5.
\107\ See BlackRock Letter, supra note 15, at 4-5. See also IEX
Letter, supra note 15, at 4; MEMX Letter, supra note 15, at 11-12.
\108\ See IEX Letter, supra note 15, at 4.
---------------------------------------------------------------------------
One commenter states that the proposal fails to acknowledge or
account for the fact that the proposed methodology relies on this
commenter's equity market data fees as one of the comparison points,
notwithstanding that, unlike the other exchanges' market data prices,
the commenter's fees used do not include individual per user fees, but
apply only on a per firm basis for firms subscribing to ``real time
data.'' \109\
---------------------------------------------------------------------------
\109\ See id. The commenter also points out that its fees do not
vary depending on the type of use made by those firms, do not apply
to data that is redistributed with a delay of as little as 15
milliseconds (whereas exchanges typically require a 15-minute delay
to avoid charges for real-time data), and were determined and
justified based on costs. The commenter further states that, to the
extent the commenter's fees are relevant at all, a more consistent
approach would have been to reflect the commenter's fees as zero,
since this particular commenter does not charge any fees on an
individual per user basis for either of the two data products.
According to the commenter, the latter approach would substantially
reduce the average ratio and multiplier, and thus substantially
reduce the fees proposed to be charged for core data. See id.
---------------------------------------------------------------------------
Some commentators believe that the proposed fees for depth-of-book
data should be lower than proposed. One commenter states that retail
investors should get free or very low cost depth-of-book data because
it is in the best interest of retail investors, the industry and the
Commission.\110\ This commenter states that displaying depth-of-book
data can give investors a better understanding of how prices are
formed.\111\ The commenter believes that the ability for an investor to
see buying and selling interests at various price levels makes it
easier for the investor to understand what determines the price of a
particular security by seeing the interaction of market and limit
orders.\112\ The commenter argues that making depth-of-book data
``cheap'' would allow brokers to give the data to retail clients for no
or low cost, and that, this, in turn, would increase retail
participation in the securities markets, because investors will not
only understand markets better, but they will participate more in the
markets.\113\ According to this commenter, if depth-of-book data is
expensive, it will not
[[Page 11794]]
help most retail investors because they will not be able to afford to
see it.\114\
---------------------------------------------------------------------------
\110\ See Angel Letter, supra note 15, at 3.
\111\ See id. at 7.
\112\ See id.
\113\ See id. at 8.
\114\ See id.
---------------------------------------------------------------------------
Another commenter states that fees for depth-of-book are
unreasonably high.\115\ The commenter states that, while the
Participants decided on an alternative method in establishing fees and
sought to demonstrate that the proposed fees are ``related to the value
of the data to subscribers,'' \116\ the proprietary depth-of-book price
inputs used by the Participants were not properly calibrated and thus
are over inclusive, resulting in depth-of-book fees that are
unreasonably high.\117\
---------------------------------------------------------------------------
\115\ See FINRA Letter, supra note 15, at 5-6.
\116\ See id. at 5.
\117\ See id. at 6. Specifically, the commenter states that (1)
the proprietary depth-of-book product fees used in determining the
ratio also include proprietary top-of-book data and auction data--
both of which would be charged separately from depth-of-book data;
(2) the depth-of-book product fees also included order-by-order
depth information--which is typically considered more valuable,
instead of aggregated--resulting in a higher ratio and overstatement
of value; and (3) the proposed depth-of-book data product fees also
included full depth information, i.e., all prices levels (also
typically considered more valuable), rather than just the top five
price levels required under the MDI Rule, resulting in a higher
ratio and fees that are not aligned with the value of the new depth-
of-book data to subscribers. The commenter argues that, as a result,
the method employed by the Participants does not align the proposed
fees for the new depth-of-book data to the value of the data to
subscribers. See id.
---------------------------------------------------------------------------
One commenter agrees with the notion that that depth-of-book data
should be priced higher than top-of-book data.\118\ This commenter,
however, believes that the charges for depth-of-book data from the
Plans should be much lower than consuming the market data directly from
the exchanges because the information provided under the Plan would
still be a subset of what is provided by the proprietary data
feeds.\119\ The commenter states that the 4x ratio used by the
Participants to determine the fees for accessing depth-of-book data is
too high.\120\
---------------------------------------------------------------------------
\118\ See NovaSparks Letter, supra note 15, at 1.
\119\ See id.
\120\ See id.
---------------------------------------------------------------------------
One commenter opposes the proposed depth-of book data fees, because
they, as well as all other proposed fees, represent an overall increase
in costs to end users making market data less accessible, contrary to
``the core precept of the'' MDI Rule.\121\ Another commenter states
that the value of the depth-of-book data should focus on greater access
and availability of this kind of data, and that the Operating Committee
should thus consider what price point would increase availability of
depth-of-book information, rather than charging a multiplier of
proprietary data feeds.\122\
---------------------------------------------------------------------------
\121\ See Cutler Letter, supra note 15, at 1. This comment
further states that the level of the proposed fees would make it
difficult for such competing consolidators to offer products at
prices competitive to those of proprietary feeds thereby placing
competing consolidators at a disadvantage. See id.
\122\ See MayStreet Letter, supra note 15, at 7.
---------------------------------------------------------------------------
One commenter expresses support for the proposed and ``moderately
priced'' non-professional rate for depth-of-book information, because,
in the commenter's view, this aspect of the proposal ``levels the
playing field'' for retail investors by providing them with access to
the same information that is available to professionals traders at an
affordable price, which, will help broaden adoption of this new
category of data.\123\
---------------------------------------------------------------------------
\123\ See BlackRock Letter, supra note 15, at 3, 5.
---------------------------------------------------------------------------
4. Fees for Auction Data
Some commenters believe that the proposed auction information fee
would result in double charging for subscribers who purchase both
auction and depth-of-book information.\124\ According to these
commenters, information about auction order imbalances is included with
the proprietary depth-of-book data products used to calculate the
depth-of-book prices; therefore the proposed depth-of-book prices
already incorporate the fees for auction imbalance data.\125\ Thus,
these commenters argue that the proposed fees would result in double
charging consumers who purchase both auction and depth-of-book
information from competing consolidators.\126\ One commenter states
that depth-of-book pricing is also inappropriately used to derive the
value of auction data because auction information is more closely
aligned with top-of-book content which only provides high-level
information about aggregate order imbalances and does not include the
order by order details or data about multiple price levels typically
included in proprietary depth-of-book information products.\127\ One
commenter states that while the pricing rationale in the proposal uses
traded volumes to arrive at a 10% multiple for auction data, this
ratio, however, is applied to the depth-of-book feed, which conveys
information about displayed liquidity not trading activity. According
to the commenter, (1) it would have been more congruent with the SROs'
proposition to use Level 1 core data as the basis for pricing auction
content as this feed is more closely associated with trade volume, and
(2) the fees for auction information should be set to 10% of Level 1
core data prices.\128\
---------------------------------------------------------------------------
\124\ See MEMX Letter, supra note 15, at 11-12. BlackRock
Letter, supra note 15, at 4-5; FINRA Letter, note 15, at 6.
\125\ See id.
\126\ See BlackRock Letter, supra note 15, at 4-5; MEMX Letter,
supra note 15, at 11-12; FINRA Letter, supra note 15, at 6.
\127\ See BlackRock Letter, supra note 15, at 5.
\128\ See id.
---------------------------------------------------------------------------
Some commenters argue that the fees for auction information under
the Proposed Amendment should be lower.\129\ One commenter states that
retail investors should get free or moderately priced auction data
because it is in the interests of retail investors, the industry and
the Commission.\130\ The commenter believes that opening and closing
auction data are important in the securities markets and that providing
auction data to retail investors will increase retail investor
participation in the market.\131\ The commenter also opines that it
makes no sense for the Participants to charge professional and non-
professionals the same amount for auction data.\132\ Another commenter
states that the filing should not be approved because the price levels
do not contribute to a level playing field between competing
consolidators and the current plan administrators, such that competing
consolidators will be at a disadvantage because they will not be able
to offer products at prices competitive with those of proprietary
feeds.\133\
---------------------------------------------------------------------------
\129\ See Angel Letter, supra note 15; Cutler Letter, supra note
15; BlackRock Letter, supra note 15.
\130\ See Angel Letter, supra note 15, at 3.
\131\ See id. at 9.
\132\ See id.
\133\ See Cutler Letter, supra note 15, at 1-2.
---------------------------------------------------------------------------
5. Fees for Professional and Non-Professional Users
Some commenters question the classification of users by
professional or non-professional to develop the fees under the Proposed
Amendment.\134\
---------------------------------------------------------------------------
\134\ See Angel Letter, supra note 15; BlackRock Letter, supra
note 15; MIAX Letter, supra note 15; Polygon.io Letter, supra note
15.
---------------------------------------------------------------------------
One commenter states that it is unreasonably discriminatory against
non-professional users to pay the same as professional users for
auction data because professionals make far more use of the data.\135\
The commenter states that the filing contains no justification as to
why the Participants propose to charge professionals the same as non-
professionals for auction data.\136\
---------------------------------------------------------------------------
\135\ See Angel Letter, supra note 15, at 9-10.
\136\ See id. at 10.
---------------------------------------------------------------------------
Some commenters support moderately priced or free non-professional
user fees. One commenter supports the proposed ``moderately priced''
non-professional rate for depth-of-book information, because, in the
[[Page 11795]]
commenter's view, this aspect of the proposal ``levels the playing
field'' for retail investors by providing them with access to the same
information that is available to professionals traders at an affordable
price, which, will help broaden adoption of this new category of
data.\137\ Another commenter states that free or moderately priced non-
professional data, including depth-of-book and auction data, is in the
best interest of brokers and exchanges because it may increase retail
order flow and thus profits into the industry.\138\ The commenter
further believes that free or moderately priced non-professional data
is in the best interest of the Commission as well because ``[p]roviding
better data to retail investors at low cost will reduce the amount of
SEC resources devoted to dealing with complaints based on
misunderstandings of market function.'' \139\
---------------------------------------------------------------------------
\137\ See BlackRock Letter, supra note 15, at 1, 3.
\138\ See Angel Letter, supra note 15, at 11.
\139\ See id. at 11.
---------------------------------------------------------------------------
Two commenters state they supported the part of the Proposed
Amendment that consists of low non-professional user fees.\140\ One
commenter states that it believes the proposed non-professional user
fees were a step in the right direction, but states that the Plan would
charge fees for professional and non-professional users that are often
higher than the fees charged by all of the exchange combined for
proprietary products, creating disincentives for firms to take SIP
data.\141\ The commenter advocates for fees that would expand access to
consolidated market data including free access to odd-lot quotation
information as well as cheaper access to depth-of-book quotation
information for non-professional users.\142\
---------------------------------------------------------------------------
\140\ See MIAX Letter, supra note 15, at 2; MEMX Letter, supra
note 15, at 3.
\141\ See MEMX Letter, supra note 15, at 3, 18-19.
\142\ See id. at 2.
---------------------------------------------------------------------------
Some commenters suggest that the Participants should not categorize
fees based on user type and suggest on ways to improve the Proposed
Amendment as it relates to these types of user classifications. One
commenter urges the Commission to disapprove the Proposed Amendment and
any future amendment that maintains non-professional and professional
user classifications because such classifications prevent competing
consolidators from being able to offer products at competitive prices
compared to the proprietary data feeds.\143\ One commenter recommends
easier-to-track proxies for usage-based charges by utilizing data
already reported by firms, such as FOCUS Reports.\144\ Another
commenter suggests slowing down the data feeds by 15 milliseconds to
mitigate the risk of professionals ``masquerading'' as non-
professionals utilizing the cheaper data.\145\ One commenter states
that the proposed professional user fees are based on a flawed
methodology that fails to provide a cost based justification, and
results in excessive fee levels which would discourage firms from
registering as competing consolidators and hinder the formation of the
decentralized consolidation model that the MDI Rule seeks to
create.\146\
---------------------------------------------------------------------------
\143\ See Polygon.io Letter, supra note 15, at 2-3.
\144\ See MayStreet Letter, supra note 15, at 8.
\145\ See Angel Letter, supra note 15, at 11.
\146\ See MIAX Letter, supra note 15, at 3.
---------------------------------------------------------------------------
Another commenter believes that the Operating Committees should
analyze whether it is fair and reasonable to continue to charge
professional and non-professional user fees that exceed the fees
charges for similar proprietary market data.\147\ This commenter argues
that the Proposed Amendment should be disapproved because, for some
firms, the professional fees proposed may be higher than if the firms
purchased certain proprietary data products.\148\ However, another
commenter responds that this analysis does not account for the fact
that purchasers of the new data would be receiving a consolidated data
product that aggregates all exchanges' data together to determine an
NBBO and the five best levels of depth among all the exchanges and
disregards that the Proposed Amendment includes much lower fees for
non-professionals.\149\ The commenter states that it is fair,
reasonable, and not unreasonable discriminatory for ``Wall Street to
pay higher fees than Main Street.'' \150\
---------------------------------------------------------------------------
\147\ See MEMX Letter, supra note 15, at 20.
\148\ See id.
\149\ See NYSE Letter, supra note 15, at 8.
\150\ See id.
---------------------------------------------------------------------------
6. Fees for Non-Display Use
Some commenters state that the proposed Non-Display Use fees are
based on a flawed methodology that fails to provide a cost based
justification, results in excessive fee levels which would discourage
firms from registering as competing consolidators and hinder the
formation of the decentralized consolidation model that the MDI Rule
seeks to create.\151\ One commenter states that the fees in the
Proposed Amendment, including the non-display fees, would place
competing consolidators at a disadvantage because they will not be able
to offer products at prices competitive with those of proprietary
feeds.\152\
---------------------------------------------------------------------------
\151\ See MIAX Letter, supra note 15, at 3; Polygon.io Letter,
supra note 15, at 2-3.
\152\ See Cutler Letter, supra note 15, at 1-2.
---------------------------------------------------------------------------
One commenter asks that the Commission reject that Amendment and
any future proposal that maintains display/non-display and
professional/non-professional classifications.\153\ The commenter
states that, if the Proposed Amendment is not rejected, competing
consolidators will not be able to offer products at competitive prices
to proprietary data feeds.\154\
---------------------------------------------------------------------------
\153\ See Polygon.io Letter, supra note 15, at 2.
\154\ See id. at 3.
---------------------------------------------------------------------------
7. Access Fees
One commenter states that the proposed Access fees are based on a
flawed methodology that fails to provide a cost based justification,
and results in excessive fee levels which would discourage firms from
registering as competing consolidators and hinder the formation of the
decentralized consolidation model that the MDI Rule seeks to
create.\155\ Another commenter stated that the proposed access fees are
not fair and reasonable because they are more expensive than those fees
charged by exchanges in the proprietary products.\156\
---------------------------------------------------------------------------
\155\ See MIAX Letter, supra note 15, at 3.
\156\ See MEMX, supra note 15, at 6, 8. See also Cutler Letter,
supra note 15, at 1-2 (noting that it supports the comment letter
written by MEMX and that the Proposed Amendment makes market data
less accessible).
---------------------------------------------------------------------------
8. Redistribution Fees
Two commenters suggest that the imposition of redistribution fees
on competing consolidators would place competing consolidators at a
competitive disadvantage.\157\ Another commenter states that by
charging redistribution fees to competing consolidators, the filing
creates a barrier to entry to technology solution vendors to become
competing consolidators.\158\
---------------------------------------------------------------------------
\157\ See NBIM Letter, supra note 15, at 2; Cutler Letter, supra
note 15, at 1-2.
\158\ See NovaSparks Letter, supra note 15, at 1.
---------------------------------------------------------------------------
One commenter states that the Proposed Amendment should treat
competing consolidators as replacements to the exclusive SIPs, not as
data vendors.\159\ It states that subjecting competing consolidators to
the same fees as data vendors and subscribers that receive consolidated
market data from the exclusive SIP fails to recognize that competing
consolidators are SIPs and not similarly situated to today's data
vendors.\160\ This
[[Page 11796]]
commenter further states that that competing consolidators should not
be charged redistribution fees because they are not redistributing
consolidated market data, but generating and distributing it for the
first time.\161\ According to this commenter, these fees for
redistribution should not be charged by the Plan because the Plan no
longer would govern the distribution of consolidated market data.\162\
The commenter states that by not recognizing competing consolidators as
SIPs, competing consolidators are placed at a competitive disadvantage
relative to data vendors given that they take on expenses and risks
that data vendors do not, such as the costs for generating consolidated
market data, disclosing operational and performance metrics,
registering with the Commission, and complying with Rule 614 of
Regulation NMS.\163\
---------------------------------------------------------------------------
\159\ See MayStreet Letter, supra note 15, at 3.
\160\ See id. at 3-4.
\161\ See id.
\162\ See id., at 5.
\163\ See id.
---------------------------------------------------------------------------
One commenter states that the proposed redistribution fee that
would be charged to competing consolidators is inconsistent with the
purposes and structure of the MDI Rule, and that this aspect of the
proposal represents a ``further indication that the intent of the
majority was to subvert the purpose of the Commission's order.'' \164\
Another commenter states that the redistribution fee for competing
consolidators is inconsistent with the MDI Rule, not fair and
reasonable, and unreasonably discriminatory.\165\ One commenter states
that the proposal's attempt to justify the redistribution fee based on
the current centralized model that charges fees to downstream vendors
is unsound because, under the decentralized MDI Rule, competing
consolidators would be ``stepping into the role that the SIPs hold
today as the primary sources of consolidated market data.'' \166\
According to this commenter, to charge a redistribution fee on top of
the other proposed fees would ``unquestionably put competing
consolidators at a further competitive disadvantage as compared to
aggregated proprietary data products offered by exchanges,'' thus
targeting them in an unfair and unreasonable manner.\167\
---------------------------------------------------------------------------
\164\ See IEX Letter, supra note 15, at 5.
\165\ See MIAX Letter, supra note 15, at 2 (citing the MDI Rule
Release which stated that ``imposing redistribution fees on data
content underlying consolidated market data that will be
disseminated by competing consolidators would be difficult to
reconcile with the standards of being fair and reasonable and not
unreasonably discriminatory in the new decentralized model,'' and
that ``fees proposed by the SROs should not contain redistribution
fees for competing consolidators because this would hinder their
ability to compete.'').
\166\ See id.
\167\ See id.
---------------------------------------------------------------------------
One commenter states the Proposed Amendment directly contradicts
the Commission's directive in the MDI Rule that competing consolidators
not be treated the same as market data vendors.\168\ It believes that
Participants are attempting to undermine the Commission's authority
over market data as enumerated in the CT Plan and MDI Rule in order to
preserve their current revenues from proprietary and SIP data.\169\ It
states that the Participants have taken the position that the competing
consolidators should be charged redistribution fees just like any
market data vendor. It believes this undermines the efforts of the MDI
Rule.\170\ The commenter reiterates the Commission's statement in the
MDI Rule Release that ``the Commission believes that the fees for the
data content underlying consolidated market data should not include
redistribution fees for competing consolidators. Competing
consolidators will take the place of the exclusive SIPs in the
dissemination of consolidated market data, which today do not pay
redistribution fees for the consolidation and dissemination of SIP
data.'' \171\ The commenter argues that by treating competing
consolidators differently than the exclusive SIPs, the Participants are
acting in an unreasonably discriminatory manner, effectively
disregarding the Exchange Act mandates in addition to the Commission's
directive in the MDI Rule.\172\ The commenter argues that imposing
redistribution fees on competing consolidators imposes an undue burden
on competition in contravention of the standards under Section 3(f) of
the Exchange Act that the Commission must consider in connection with
any Commission rulemaking or review of SRO rules.\173\
---------------------------------------------------------------------------
\168\ See SIFMA Letter, supra note 15, at 4-5.
\169\ See id. at 6.
\170\ See id. at 7.
\171\ See id.
\172\ See id., at 8.
\173\ See id.
---------------------------------------------------------------------------
Two commenters state that the redistribution fees charged to
competing consolidators are in contravention of the Commission's
express direction in the MDI Rule and that the Proposed Amendment
disregards the directive.\174\
---------------------------------------------------------------------------
\174\ See FINRA Letter, supra note 15, at 5; MEMX Letter, supra
note 15, at 21.
---------------------------------------------------------------------------
One commenter states that, although the Commission compared
competing consolidators to self-aggregators, a more appropriate
comparison would be between competing consolidators and downstream
vendors.\175\ According to this commenter, because such vendors would
be subject to redistribution fees when redistributing data to its
subscribers, it would impose a burden on competition and be unfair to
vendors not to charge a redistribution fee for exactly the same
activity to competing consolidators.\176\
---------------------------------------------------------------------------
\175\ See NYSE Letter, supra note 15, at 7.
\176\ See id.
---------------------------------------------------------------------------
9. Broker-Dealer Enterprise Cap
One commenter favors expanding the broker-dealer enterprise cap
that is part of the current fee schedule of the Plan. The commenter
states that the Proposed Amendment provides no depth-of-book enterprise
cap and the Level 1 enterprise caps are out of reach for most market
Participants.\177\ In particular, this commenter recommends that
enterprise caps be implemented at multiple tiers levels.\178\
---------------------------------------------------------------------------
\177\ See MayStreet Letter, supra note 15, at 8.
\178\ See id. at 8.
---------------------------------------------------------------------------
C. NMS Plan Governance
Some commenters state that the MDI Rule should be implemented
through the CT Plan, as opposed to the existing market data equity
plans (i.e., the CTA/CQ, and Nasdaq/UTP Plans).\179\ One commenter
reiterated its continued support for the provisions of the CT Plan
overall.\180\ The commenter states that the real and potential
conflicts of interest that currently exist relating to the provision of
market data directly relate to the decision-making problems at the
Plans' Operating Committees.\181\ The commenter supports expanding the
voting representation under the CT Plan to non-SROs and having them
participate as full voting members of the Operating Committee.\182\ The
commenter believes the Commission cannot approve the Proposed Amendment
given the inherent conflicts of interests of the SROs who developed the
proposals.\183\ The commenter states that, if the Commission approved
the Proposed Amendment, it would be giving tacit approval to the
shortcomings in the governance structure of the current Plans.\184\
---------------------------------------------------------------------------
\179\ See BMO Letter, supra note 15; MEMX Letter, supra note 15;
MIAX Letter, supra note 15; IEX Letter, supra note 15; and
Polygon.io Letter, supra note 15.
\180\ See BMO Letter, supra note 15, at 1.
\181\ See id. at 2.
\182\ See id.
\183\ See id.
\184\ See id.
---------------------------------------------------------------------------
This commenter also notes that the proposed fee amendments are
explicitly stated by the Participants to be unrelated to the cost of
providing the
[[Page 11797]]
data, but rather to subscriber value.\185\ The commenter states that
this is a clear example of the Plan's Operating Committee failing to
ensure that the public service mandates of the SIPs are achieved and is
a failure in governance through the unmitigated conflicts of interest
by voting members who just want to maximize profits.\186\ The commenter
states that further evidence of the failure of the governance structure
on the Operating Committee is that the fee proposals have been proposed
while the remaining reforms of the CT Plan are stayed pending
resolution of challenges in the D.C. Circuit.\187\ The commenter states
that it is surprised that the proposals were filed without broader
participation, given that certain members of the Operating Committee
have stated publicly that the proposals contradict the Exchange Act
standards for consolidated data which requires that the fees be fair,
reasonable, and not unreasonably discriminatory.\188\
---------------------------------------------------------------------------
\185\ See id.
\186\ See id. at 2-3.
\187\ See id. at 3.
\188\ See id. (citing note 14 of the Notice, which states in
part: ``FINRA, IEX, LTSE, MIAX, and MEMX have not joined in the
decision to approve the filing of the proposed amendment, and Nasdaq
BX is also withholding its vote at this time.'').
---------------------------------------------------------------------------
Another commenter also encourages the Commission to consider
whether the CT Plan is a more appropriate body for setting fees for
consolidated market data.\189\ This commenter believes that placing the
responsibility for setting fees in the hands of the CT Plan would allow
SIP fees to be set by an Operating Committee that better reflects the
constituencies impacted by this filing, including non-SRO
representatives.\190\ A second commenter states that the fee proposals
are ``the result of a conflicted and unbalanced voting process,''
adding that it agreed with the recommendation that the responsibility
for setting the proposed fees should be placed on the CT Plan.\191\ A
third commenter recommends that the Commission disapprove the proposal
and reassign the responsibility for the filing to the Operating
Committee for the CT Plan, which the commenter states would have a
``broader set of voting stakeholders and a fairer and less conflicted
governance structure,'' a change that, as this proposal shows, is
``badly'' needed.\192\
---------------------------------------------------------------------------
\189\ See MEMX Letter, supra note 15, at 23-24.
\190\ See id.
\191\ See MIAX Letter, supra note 15, at 5.
\192\ See IEX Letter, supra note 15, at 5.
---------------------------------------------------------------------------
One commenter asks the Commission to reevaluate the process that
led to the creation of the Proposed Amendment and make substantive
changes to avoid the amendment process being used to derail timely
implementation of the MDI Rule.\193\
---------------------------------------------------------------------------
\193\ See Polygon.io Letter, supra note 15, at 3.
---------------------------------------------------------------------------
D. Consideration of Other Actions Under Rule 608 of Regulation NMS
In connection with recommending disapproval of the Proposed
Amendment, one commenter states the Commission could consider potential
action under Rule 608(a)(2) of Regulation NMS, which allows the
Commission to directly propose amendments to effective national market
system plans.\194\ The commenter states that in connection with a
Commission disapproval of the Proposed Amendment, it would ``support
the Commission's efforts to ensure that the newly expanded consolidated
market data (i.e., new core data) under the Commission's Infrastructure
Rule is disseminated in a manner consistent with the Exchange Act
standards to ensure the investing public and all market participants
have fair and reasonable access to it.'' \195\
---------------------------------------------------------------------------
\194\ See SIFMA Letter, supra note 15, at 2.
\195\ See id.
---------------------------------------------------------------------------
One commenter believes that it would be inconsistent with the
Exchange Act and Rule 608 for the Commission to sua sponte change any
or all of the proposed fees, as any such change would be material to
the Proposed Amendment.\196\ The commenter states that, in its view, if
the Commission intends to revise the Proposed Amendment in any material
way, it must do so through rule-making under Rule 608(b)(2), by
providing public notice of the specific changes it proposes and giving
the Participants and general public an opportunity to comment.\197\
---------------------------------------------------------------------------
\196\ See NYSE Letter, supra note 15, at 8.
\197\ See id.
---------------------------------------------------------------------------
IV. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Amendment
The Commission is instituting proceedings pursuant to Rule
608(b)(2)(i) of Regulation NMS,\198\ and Rule 700 of the Commission's
Rules of Practice,\199\ to determine whether to approve or disapprove
the Proposed Amendment or to approve the Proposed Amendment with any
changes or subject to any conditions the Commission deems necessary or
appropriate after considering public comment. Institution of
proceedings does not indicate that the Commission has reached any
conclusions with respect to any of the issues involved. Rather, the
Commission seeks and encourages interested persons to provide
additional comment on the Proposed Amendment to inform the Commission's
analysis.
---------------------------------------------------------------------------
\198\ 17 CFR 242.608.
\199\ 17 CFR 201.700.
---------------------------------------------------------------------------
Rule 608(b)(2) of Regulation NMS provides that the Commission
``shall approve a . . . proposed amendment to a national market system
plan, with such changes or subject to such conditions as the Commission
may deem necessary or appropriate, if it finds that such . . .
amendment is necessary or appropriate in the public interest, for the
protection of investors and the maintenance of fair and orderly
markets, to remove impediments to, and perfect the mechanisms of, a
national market system, or otherwise in furtherance of the purposes of
the Act.'' \200\ Rule 608(b)(2) further provides that the Commission
shall disapprove a proposed amendment if it does not make such a
finding.\201\ Pursuant to Rule 608(b)(2)(i) of Regulation NMS,\202\ the
Commission is providing notice of the grounds for disapproval under
consideration:
---------------------------------------------------------------------------
\200\ See 17 CFR 242.608(b)(2).
\201\ See id.
\202\ 17 CFR 242.608(b)(2)(i). See also Commission Rule of
Practice 700(b)(2), 17 CFR 201.700(b)(2).
---------------------------------------------------------------------------
Whether the Proposed Amendment is consistent with the
Commission's MDI Rule; \203\
---------------------------------------------------------------------------
\203\ See MDI Rule Release, supra note 9.
---------------------------------------------------------------------------
Whether, consistent with Rule 608 of Regulation NMS, the
Proposed Amendment is necessary or appropriate in the public interest,
for the protection of investors and the maintenance of fair and orderly
markets, to remove impediments to, and perfect the mechanisms of, a
national market system, or otherwise in furtherance of the purposes of
the Act; \204\
---------------------------------------------------------------------------
\204\ See 17 CFR 242.608(b)(2).
---------------------------------------------------------------------------
Whether, consistent with Rule 603(a) and 614(d)(3) of
Regulation NMS, the Proposed Amendment provides for the distribution of
information with respect to quotations for and transactions in NMS
stocks on terms that are fair and reasonable and not unreasonably
discriminatory;
Whether modifications to the Proposed Amendment, or
conditions to its approval, would be required to make the Proposed
Amendment necessary or appropriate in the public interest, for the
protection of investors and the maintenance of fair and orderly
markets, to remove impediments to, and perfect the mechanisms of, a
national market system, or otherwise in furtherance of the purposes of
the Act; \205\
---------------------------------------------------------------------------
\205\ See id.
---------------------------------------------------------------------------
Whether the Proposed Amendment is consistent with
Congress's finding, in
[[Page 11798]]
Section 11A(1)(C)(iii) of the Act, that it is in the public interest
and appropriate for the protection of investors and the maintenance of
fair and orderly markets to ensure ``the availability to brokers,
dealers, and investors or information with respect to quotations for
and transactions in securities''; \206\ and
---------------------------------------------------------------------------
\206\ 15 U.S.C. 78k-1(a)(1)(C)(iii).
---------------------------------------------------------------------------
Whether, consistent with the purposes of Section
11A(c)(1)(B) of the Act,\207\ the Proposed Amendment's provisions are
drafted to support the prompt, accurate, reliable, and fair collection,
processing, distribution, and publication of information with respect
to quotations for and transactions in NMS securities, and the fairness
and usefulness of the form and content of such information.
---------------------------------------------------------------------------
\207\ See 15 U.S.C. 78k-1(c)(1)(B).
---------------------------------------------------------------------------
Under the Commission's Rules of Practice, the ``burden to
demonstrate that a NMS plan filing is consistent with the Exchange Act
and the rules and regulations issued thereunder . . . is on the plan
participants that filed the NMS plan filing.'' \208\ The description of
the NMS plan filing, its purpose and operation, its effect, and a legal
analysis of its consistency with applicable requirements must all be
sufficiently detailed and specific to support an affirmative Commission
finding.\209\ Any failure of the plan participants that filed the NMS
plan filing to provide such detail and specificity may result in the
Commission not having a sufficient basis to make an affirmative finding
that the NMS plan filing is consistent with the Exchange Act and the
applicable rules and regulations thereunder.\210\
---------------------------------------------------------------------------
\208\ 17 CFR 201.700(b)(3)(ii).
\209\ Id.
\210\ Id.
---------------------------------------------------------------------------
V. Commission's Solicitation of Comments
The Commission requests that interested persons provide written
submissions of their views, data, and arguments with respect to the
issues identified above, as well as any other concerns they may have
with the proposal. In particular, the Commission invites the written
views of interested persons concerning whether the proposal is
consistent with Section 11A or any other provision of the Act, or the
rules and regulations thereunder. Although there do not appear to be
any issues relevant to approval or disapproval that would be
facilitated by an oral presentation of views, data, and arguments, the
Commission will consider, pursuant to Rule 608(b)(2)(i) of Regulation
NMS,\211\ any request for an opportunity to make an oral
presentation.\212\ The Commission asks that commenters address the
sufficiency and merit of the Participants' statements in support of the
Proposed Amendment,\213\ in addition to any other comments they may
wish to submit about the proposed rule changes. In particular, the
Commission seeks comment on the following:
---------------------------------------------------------------------------
\211\ 17 CFR 242.608(b)(2)(i).
\212\ Rule 700(c)(ii) of the Commission's Rules of Practice
provides that ``[t]he Commission, in its sole discretion, may
determine whether any issues relevant to approval or disapproval
would be facilitated by the opportunity for an oral presentation of
views.'' 17 CFR 201.700(c)(ii).
\213\ See Notice, supra note 6.
---------------------------------------------------------------------------
1. In the MDI Rule Release, the Commission stated that ``the fees
for the data content underlying consolidated market data must satisfy
the statutory standards of being fair, reasonable and not unreasonably
discriminatory.'' \214\ What are commenters' views as to each of the
fees proposed?
---------------------------------------------------------------------------
\214\ See MDI Rule Release, supra note 9, 86 FR at 18684.
---------------------------------------------------------------------------
2. In the Cover Letter,\215\ the Participants state that ``under
the decentralized competing consolidator model, the Operating Committee
has no knowledge of any of the costs associated with consolidated
market data.'' The Participants further state that, under the
decentralized competing consolidator model described in the MDI Rule
Release, the Plan's Operating Committee no longer has a role in either
specifying the technology associated with exchanges providing data or
contracting with a SIP and that each national securities exchange will
be responsible for determining the methods of access to and format of
data necessary to generate consolidated market data. The Participants
also state that the Operating Committee will not have access to
information about how each exchange would generate the data that they
each would be required to disseminate under amended Rule 603(b).
According to the Participants, the Operating Committee does not have
access to any information about the cost of providing consolidated
market data under the decentralized competing consolidator model.
---------------------------------------------------------------------------
\215\ See Cover Letter, supra note 1.
---------------------------------------------------------------------------
Do commenters agree with the statements that the Participants have
made with respect to their ability, current or future, to determine the
costs of generating consolidated market data?
3. What are commenters' views on the Participants argument that a
``value-based'' methodology is an appropriate basis to determine the
fees for core data? What are commenters' views on the methodology
proposed by the Participants?
4. What are commenters' views on whether the comparison of
exchanges' proprietary depth-of-book fees to the current SIP feeds is
an appropriate means to calculate the ``value'' of consolidated market
data? Do commenters believe that the pricing for individual exchange
market data products can serve as an appropriate means for justifying
the proposed fees? What are commenters' views on the prices of the
depth-of-book feeds--whether by reference to cost or to prices set by a
competitive market for equity market data as opposed to market power?
5. What are commenters' views on the Participants' calculation of
the appropriate ratio to be applied to current SIP fees to generate the
proposed fees for content underlying consolidated market data? Were
appropriate depth-of-book products selected for the calculation? What
are commenters' views about the ratios and methodology used generate
fees?
6. Under the Proposed Amendment, the consolidated market data
depth-of-book product would not include top-of-book data. What are
commenters' views on basing the price of depth-of-book consolidated
market data on the fees for proprietary products that do not include
top-of-book data?
7. In the Cover Letter,\216\ the Participants state that they
reviewed the depth-of-book to top-of-book ratios of Professional device
rates on Nasdaq (Nasdaq Basic/Nasdaq TotalView), Cboe (Cboe Full
Depth), NYSE (BQT/NYSE Integrated), and IEX (TOPS/DEEP) to determine an
appropriate ratio between the fees of depth-of-book core data products
and the current Level 1 (top-of-book) data. The Participants further
state that they believe that the 3.94x ratio represents the difference
in value between top-of-book data and five levels of depth that would
be required to be included in consolidated market data under amended
Rule 603(b). What are commenters' views on setting fees under the
Proposed Amendment based on the ratio of fees for depth-of-book and
top-of-book proprietary data products?
---------------------------------------------------------------------------
\216\ See Cover Letter, supra note 1.
---------------------------------------------------------------------------
8. Under the Proposed Amendment, the consolidated market data
depth-of-book product would include only aggregate order information at
each price level, not order-by-order data. What are commenters' views
on whether the price of depth-of-book consolidated market data should
be based on the fees for proprietary products that include order-by-
order data? What are commenters' views on the selection of the
referenced
[[Page 11799]]
proprietary data products used to price the fees in the Proposed
Amendment, including other exchange fees considered but not selected as
a reference for the development of pricing under the Proposed
Amendment?
9. Under the Proposed Amendment, the consolidated market data
depth-of-book product would not include auction data, which would be
sold separately. What are commenters' views on whether the price of
depth-of-book consolidated market data should be based on the fees for
proprietary depth-of-book products that include auction data?
10. What are commenters' views on whether users should be
classified as professionals and non-professionals under the Proposed
Amendment? Should non-professional subscribers to pay the same fees as
professional subscribers for the auction data under the Proposed
Amendment? Why or why not? Should professionals to pay a different
price than non-professionals for products other than auction data under
the Proposed Amendment? Why or why not? If commenters believe that
classification based on user type for the contents of the consolidated
market data is appropriate, do commenters support or oppose low-cost
non-professional user fees? Why or why not?
11. What are commenters' views on the non-display fees in the
Proposed Amendment?
12. What are commenters' views on the access fees in the Proposed
Amendment? What are commenters' views on whether the Participants
should charge access fees? Should competing consolidators be required
to pay access fees? Why or why not? Should access fees be treated like
connectivity fees, market data fees, or something else? Why or why not?
13. What are commenters' views on how the cost of purchasing
consolidated top-of-book, depth-of-book, and auction data under the
Proposed Amendment compares to the cost of subscribing to the existing
proprietary data feeds that would contain similar or more data? What
are commenters' views regarding the relationship of this comparison to
the fees under the Proposed Amendment?
14. The Commission stated in the MDI Rule Release that ``imposing
redistribution fees on data content underlying consolidated market data
that will be disseminated by competing consolidators would be difficult
to reconcile with the standards of being fair and reasonable and not
unreasonably discriminatory in the new decentralized model,'' \217\ and
that ``fees proposed by the SROs should not contain redistribution fees
for competing consolidators because this would hinder their ability to
compete.'' \218\ What are commenters' views on the justification
offered by the Participants in favor of charging redistribution fees to
competing consolidators? What are commenters' views regarding competing
consolidators being treated similarly to data vendors and charged
redistribution fees? Would charging redistribution fees to competing
consolidators (and thus subjecting them to the same fees as vendors and
subscribers) place them at a competitive disadvantage to the exchanges
offering proprietary market data for sale? Why or why not? Do
commenters believe that imposing redistribution fees on competing
consolidators would impose a burden on competition? Why or why not?
What are commenters' views on the level of redistribution fees in the
Proposed Amendment?
---------------------------------------------------------------------------
\217\ See MDI Rule Release, supra note 9, 86 FR at 18685.
\218\ See id., 86 FR at 18682, n.1136.
---------------------------------------------------------------------------
15. What are commenters' views on the prices for Level 1 core data,
which has been expanded to include odd-lot quotations?
16. What are commenters' views on whether the operating costs of
the exclusive SIPs should be deducted from the Level 1 fees in the
Proposed Amendment to reflect the new role of competing consolidators?
If so, how should they be taken into account? What are commenter's
views on whether the operating costs of the exclusive SIPs should be
taken into account in determining the fees for depth-of-book core data?
If so, how should they be taken into account? Do commenters believe
that the new fees for Level 1 core data should have been proposed by
the Participants? Why or why not? What are commenters' views on how any
new fees for Level 1 data should have been determined?
17. Overall, what are commenters' views on the proposed prices for
consolidated depth-of-book data? How do commenters believe the cost of
depth-of-book data under the Plan should compare to consuming the same
or similar data directly from the exchanges? Do commenters believe that
the proposed price point for depth-of-book data would increase the
availability of the information for investors? Why or why not? Do
commenters believe that the calculation of the proposed depth-of-book
data fee would essentially double-charge customers for top-of-book
information that they would have to buy separately through the Level I
feed? Why or why not? What are commenters' views on the statement in
the Proposed Amendment that depth-of-book data may not be redistributed
on a delayed basis?
18. What are commenters' views on the prices for auction
information? Do commenters believe the proposed prices for auction
information are priced too high, too low, or at the correct level? Why
or why not? What are commenters' views on the lack of a distinction
between prices charged to professional and non-professional users for
auction information? What are commenters' views on the statement in the
Proposed Amendment that auction information may not be redistributed on
a delayed basis?
19. In the Cover Letter,\219\ the Participants stated that, with
respect to the fees for auction information, they looked to the
percentage of average dialing trading volume that occurs during an
auction process and determined that roughly 10% of the trading volume
takes place in auctions. The Participants stated that they therefore
believe that charging a fee for auction data that is 10% of the fee
charged for depth-of-book data appropriately reflects the value of
auction information. What are commenters' views about this method for
determining the fees for auction data?
---------------------------------------------------------------------------
\219\ See Cover Letter, supra note 1.
---------------------------------------------------------------------------
20. What are commenters' views on the lack of an enterprise fee cap
in the proposal? Should enterprise caps have been proposed by the
Participants for each category of data (e.g., Level 1, depth-of-book,
auction information)? Should multiples enterprise caps have been
proposed to reflect different size enterprises? Why or why not?
21. What are commenters' views on the Participants' clarification
in the Proposed Amendment that the Per Query Fee would not apply to the
expanded market data content required by the MDI Rule and would only be
available for the receipt and use of the Level 1 Service?
22. In the Cover Letter, the Participants state that FINRA OTC Data
will not be provided to competing consolidators, although it is still
being provided to the UTP Processor for inclusion in the consolidated
market data made available by the UTP Processor. What are commenters'
views on the Participants' proposal to add clarifying language to make
clear that UTP Level 1 Service obtained from the Processor would
include FINRA OTC
[[Page 11800]]
Data but would not include odd-lot information?
23. What are commenters' views on the belief of some market
participants that conflicts of interest by the Participants who also
sell proprietary data products have resulted in proposed fees that are
not fair, reasonable, and unreasonably discriminatory? \220\ What are
commenters' views on whether the opinions of the advisory committee
members and SROs who did not vote in favor of the Proposed Amendment
should have been accommodated in the Proposed Amendment?
---------------------------------------------------------------------------
\220\ See Section III.C, supra.
---------------------------------------------------------------------------
24. Should the Commission approve or disapprove the Proposed
Amendment? Why or why not? Should the Commission approve the Proposed
Amendment with modifications? If so, what modifications would be
appropriate and why?
Interested persons are invited to submit written data, views, and
arguments regarding whether the proposal should be approved or
disapproved by March 23, 2022. Any person who wishes to file a rebuttal
to any other person's submission must file that rebuttal by April 6,
2022. 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 No. S7-24-89 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 No. S7-24-89. 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 Participants' principal offices. 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 File No. S7-24-89 and should be submitted
on or before March 23, 2022.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\221\
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\221\ 17 CFR 200.30-3(a)(85).
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Jill M. Peterson,
Assistant Secretary.
[FR Doc. 2022-04332 Filed 3-1-22; 8:45 am]
BILLING CODE 8011-01-P
