Self-Regulatory Organizations; The Nasdaq Stock Market LLC; Suspension of and Order Instituting Proceedings To Determine Whether To Approve or Disapprove Proposed Rule Change To Increase Fees for Certain Market Data and Connectivity Products and To Maintain the Current Fees for Such Products if Members Meet a Minimum Average Daily Displayed Volume Threshold, 46243-46250 [2024-11581]
Download as PDF
<![CDATA[
Federal Register / Vol. 89, No. 103 / Tuesday, May 28, 2024 / Notices
designate if it finds such longer period
to be appropriate and publishes its
reasons for so finding or (ii) as to which
the self-regulatory organization
consents, the Commission will:
(A) by order approve or disapprove
the proposed rule change, or
(B) institute proceedings to determine
whether the proposed rule change
should be disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
khammond on DSKJM1Z7X2PROD with NOTICES
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
LTSE–2024–03 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–LTSE–2024–03. 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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
VerDate Sep<11>2014
18:43 May 24, 2024
Jkt 262001
subject to copyright protection. All
submissions should refer to file number
SR–LTSE–2024–03 and should be
submitted on or before June 18, 2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.60
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–11580 Filed 5–24–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–100188; File No. SR–
NASDAQ–2024–016]
Self-Regulatory Organizations; The
Nasdaq Stock Market LLC; Suspension
of and Order Instituting Proceedings
To Determine Whether To Approve or
Disapprove Proposed Rule Change To
Increase Fees for Certain Market Data
and Connectivity Products and To
Maintain the Current Fees for Such
Products if Members Meet a Minimum
Average Daily Displayed Volume
Threshold
May 21, 2024.
I. Introduction
On March 22, 2024, The Nasdaq Stock
Market LLC (‘‘Nasdaq’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’ or ‘‘SEC’’),
pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2 a
proposed rule change (File Number SR–
NASDAQ–2024–016) to increase fees for
certain market data and connectivity
products and to maintain the current
fees for such products if members meet
a minimum average daily displayed
volume threshold (‘‘Proposal’’). The
proposed rule change was immediately
effective upon filing with the
Commission pursuant to Section
19(b)(3)(A) of the Act.3 The proposed
rule change was published for comment
in the Federal Register on April 1,
2024.4 The Commission has received
one comment letter on the proposed
rule change.5 Pursuant to Section
60 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
3 15 U.S.C. 78s(b)(3)(A). A proposed rule change
may take effect upon filing with the Commission if
it is designated by the exchange as ‘‘establishing or
changing a due, fee, or other charge imposed by the
self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory
organization.’’ 15 U.S.C. 78s(b)(3)(A)(ii).
4 See Securities Exchange Act Release No. 99879
(April 5, 2024), 89 FR 24070 (‘‘Notice’’).
5 See Letter from Tyler Gellasch, President and
CEO, Healthy Markets Association, to Vanessa
1 15
PO 00000
Frm 00189
Fmt 4703
Sfmt 4703
46243
19(b)(3)(C) of the Act,6 the Commission
is hereby: (1) temporarily suspending
the proposed rule change; and (2)
instituting proceedings to determine
whether to approve or disapprove the
proposed rule change.
II. Background and Description of the
Proposed Rule Change
The Exchange states that the purpose
of the proposed rule change is to reward
firms that meet a minimum average
daily displayed volume with lower fees
for Non-Display Usage and the
Exchange’s 40Gb and 10Gb Ultra highspeed connection to the Exchange.7 The
Exchange explains that Non-Display
fees are currently assessed on a persubscriber 8 or per-firm basis.9 Monthly
fees are $375 per Subscriber for 1–39
subscribers; $15,000 per firm for 40–99
subscribers; $30,000 per firm for 100–
249 subscribers; and $75,000 per firm
for 250 or more subscribers.10 Under the
proposed rule change, a member firm
that meets the minimum ADV threshold
discussed below would continue to pay
those fees.11 The Exchange further states
that firms that do not meet the
minimum ADV threshold, however, as
well as non-member firms, would pay
the new monthly fees of $500 per
subscriber for 1–39 subscribers; $20,000
per firm for 40–99 subscribers; $40,000
per firm for 100–249 subscribers; and
$100,000 per firm for 250 or more
subscribers.12
Countryman, Secretary, Commission, dated April
24, 2024 (‘‘HMA Letter’’). Comments received on
the Proposal are available at https://www.sec.gov/
comments/sr-nasdaq-2024-016/
srnasdaq2024016.htm.
6 15 U.S.C. 78s(b)(3)(C).
7 This proposed rule change was initially filed on
March 6, 2024, as SR–Nasdaq–2024–011. On March
20, 2024, that filing was withdrawn and replaced
with SR–Nasdaq–2024–015. On March 22, 2024,
SR–Nasdaq–2024–015 was withdrawn and replaced
with the instant filing due to a technical error. See
Notice, 89 FR at 24070.
8 ‘‘Subscriber’’ is defined as a device or computer
terminal or an automated service which is entitled
to receive information. See Notice, 89 FR at 24070.
9 See Notice, 89 FR at 24070.
10 See id.
11 See id.
12 See id. (stating that Non-Display Usage is any
method of accessing Nasdaq U.S. information that
involves access or use by a machine or automated
device without access or use of a display by a
natural person and that examples of Non-Display
Usage include, but are not limited to: Automated
trading; Automated order/quote generation and/or
order/quote pegging; Price referencing for use in
algorithmic trading; Price referencing for use in
smart order routing; Program trading and high
frequency trading; Order verification; Automated
surveillance programs; Risk management;
Automatic order cancellation, or automatic error
discovery; Clearing and settlement activities;
Account maintenance (e.g., controlling margin for a
customer account); and ‘‘Hot’’ disaster recovery).
The Exchange also states that, although either top-
E:\FR\FM\28MYN1.SGM
Continued
28MYN1
46244
Federal Register / Vol. 89, No. 103 / Tuesday, May 28, 2024 / Notices
khammond on DSKJM1Z7X2PROD with NOTICES
Nasdaq states that it offers customers
the opportunity to co-locate their
servers and equipment within the
Nasdaq Data Center,13 allowing
participants an opportunity to reduce
latency and network complexity.14
Nasdaq offers a variety of connectivity
options to fit a firm’s specific
networking needs, including the highspeed 40Gb and 10Gb Ultra networks.15
The Exchange further states that all of
its colocation and connectivity options
offer customers access to any or all
Nasdaq exchanges through a single
connection.16
Nasdaq currently charges members an
ongoing monthly fee of $21,100 for the
40Gb fiber connection and $15,825 for
the 10Gb Ultra connection to the Nasdaq
exchanges.17 Under the proposed rule
change, a firm that meets the minimum
ADV threshold would continue to pay
those fees.18 Member firms that do not
meet the minimum ADV threshold
discussed below, as well as non-member
firms, would pay the new monthly fee
of $23,700 for the 40Gb fiber connection
and $17,800 for the 10Gb Ultra
connection.19
The Proposal introduces the new term
‘‘Minimum ADV,’’ which will mean the
introduction by a member of at least one
million shares of added executed
displayed liquidity on average per
trading day in all securities through one
or more of the member’s market
participant identifiers (‘‘MPIDs’’) on the
Nasdaq Market Center.20 Average daily
volume is calculated as the total volume
of shares executed for all added
displayed orders in all securities during
the trading month divided by the
number of trading days in that month,
averaged over the six-month period
of-book or depth-of-book data can be used for NonDisplay Usage, the Proposal modifies fees for depthof-book data only. See Notice, 89 FR at 24070
(citing Equity 7, Section 123 (Nasdaq Depth-of-Book
data)).
13 See Notice, 89 FR at 24070 (citing Nasdaq CoLocation (CoLo) Services, available at https://
www.nasdaqtrader.com/trader.aspx?id=colo; Stock
Exchange Data Center & Trading, available at
https://www.nasdaq.com/solutions/nasdaq-colocation).
14 See Notice, 89 FR at 24070.
15 See id.
16 See id. (citing Securities Exchange Act Release
No. 84571 (November 9, 2018), 83 FR 57758
(November 16, 2018) (SR–Nasdaq–2018–086)).
Nasdaq also states, as an example, that a firm that
is a member of all six Nasdaq exchanges that
purchases services in the Nasdaq Data Center such
as a 40G fiber connection, cabinet space, cooling
fans, and patch cables only purchases these
products or services once to use them for all six
Nasdaq exchanges. See Notice, 89 FR at 24070.
17 See Notice, 89 FR at 24070.
18 See id.
19 See id.
20 See id.
VerDate Sep<11>2014
18:43 May 24, 2024
Jkt 262001
preceding the billing month, or the date
the firm became a member, whichever is
shorter. New members will be deemed
to meet the Minimum ADV for the first
month of operation.21 Minimum ADV
excludes sponsored access by a member
on behalf of a third party.22 Nasdaq
states that the Minimum ADV threshold
was designed to be accessible to all
members to promote wide engagement
with the Exchange.23
Nasdaq states that it does not expect
any member to be disadvantaged by the
Proposal. Nasdaq is a maker-taker
platform and offers rebates to members
that offer displayed liquidity.24 With
these rebates, Nasdaq states that no
member should have any difficulty
posting and executing sufficient
displayed liquidity to meet the ADV
threshold.25 Nasdaq further states that
the threshold is set at a level that
Nasdaq believes any member—even
smaller members—should be able to
meet without significant effort.26
Nasdaq states that, because the
threshold applies to displayed liquidity
only, the Proposal should not impact
the Best Execution obligations of any
member.27 Nasdaq believes that, if all
members were to meet this threshold,
the Proposal would add an incremental
60–80 million shares to Nasdaq’s
accessible liquidity.28 Nasdaq states that
non-members that do not post displayed
liquidity to the market would pay the
higher fees because the non-members do
not directly contribute order flow to the
Exchange, but nevertheless benefit from
that order flow through tighter spreads,
better prices, and the other advantages
of a more liquid platform.29
III. Suspension of the Proposed Rule
Change
Pursuant to Section 19(b)(3)(C) of the
Act,30 at any time within 60 days of the
date of filing of an immediately effective
proposed rule change pursuant to
Section 19(b)(1) of the Act,31 the
Commission summarily may
temporarily suspend the change in the
rules of a self-regulatory organization
(‘‘SRO’’) if it appears to the Commission
that such action is necessary or
appropriate in the public interest, for
the protection of investors, or otherwise
21 See
id. at 24070–1.
id. at 24071.
23 See id.
24 See id.
25 See id.
26 See id.
27 See id.
28 See id.
29 See id.
30 15 U.S.C. 78s(b)(3)(C).
31 15 U.S.C. 78s(b)(1).
22 See
PO 00000
Frm 00190
Fmt 4703
Sfmt 4703
in furtherance of the purposes of the
Act. The Commission believes a
temporary suspension of the proposed
rule change is necessary and
appropriate to allow for additional
analysis of the proposed rule change’s
consistency with the Act and the rules
thereunder.
A. Exchange Statements In Support of
the Proposal
In support of the Proposal, the
Exchange states that exchanges, like all
trading venues, compete as platforms.32
All elements of the platform—trade
executions, market data, connectivity,
membership, and listings—operate in
concert.33 Trade executions increase the
value of market data; market data
functions as an advertisement for onexchange trading; listings increase the
value of trade executions and market
data; and greater liquidity on the
exchange enhances the value of ports
and colocation services.34 The Exchange
states that the Proposal is designed to
promote competition by providing an
incentive for members to provide
liquidity (therefore attracting investors
and increasing the overall value of the
platform) through charging lower fees
for other platform services (i.e., market
data and connectivity).35 The Exchange
states that this will lead to more
displayed liquidity on the Exchange,
enhancing and enriching the market
data distributed to the industry, which
then increases the amount of interest in
the platform.36 The Exchange states that
this will also enable it to offer investors
a more robust, lower cost-trading
experience through tighter spreads and
more efficient trading, placing it in a
better competitive position relative to
other exchanges and trading venues.37
32 See
Notice, 89 FR at 24071.
id.
34 See id. The Exchange also states that it attached
to the filing with the Commission a data-based
analysis demonstrating how platform competition
works entitled ‘‘How Exchanges Compete: An
Economic Analysis of Platform Competition’’ as
Exhibit 3, explaining that exchanges are multi-sided
platforms, whose value is dependent on attracting
users to multiple sides of the platform. See id. The
Exchange states that issuers need investors, and
every trade requires two sides to trade, and to make
its platform attractive to multiple constituencies, an
exchange must consider inter-side externalities,
meaning demand for one set of platform services
depends on the demand for other services. See id.
35 See Notice, 89 FR at 24071.
36 See id.
37 See id. The Exchange further states that, to the
degree that the additional liquidity is moved from
off-exchange venues to on-exchange platforms,
overall market transparency will improve as well.
See id.
33 See
E:\FR\FM\28MYN1.SGM
28MYN1
Federal Register / Vol. 89, No. 103 / Tuesday, May 28, 2024 / Notices
1. The Exchange Believes that Fees
Produced in a Competitive Environment
are an Equitable Allocation of
Reasonable Dues, Fees, and Other
Charges
The Exchange states that reliance on
competitive solutions is fundamental to
the Act.38 The Exchange further states
that significant competitive forces
constrain fees, fee levels meet the Act’s
standard for the ‘‘equitable allocation of
reasonable dues, fees, and other charges
among members and issuers and other
persons using its facilities,’’ 39 unless
there is a substantial countervailing
basis to find that a fee does not meet
some other requirement of the Act.40
The Exchange states that evidence of
platform competition demonstrates that
each exchange product is sold in a
competitive environment, and its fees
will be an equitable allocation of
reasonable dues, fees, and other charges,
provided that nothing about the product
or its fee structure impairs
competition.41
The Exchange states that Congress
directed the Commission to ‘‘rely on
‘competition, whenever possible, in
meeting its regulatory responsibilities
for overseeing the SROs and the
national market system,’ ’’ 42 and,
following this mandate, that the
Commission and the courts have
repeatedly expressed their preference
for competition over regulatory
intervention to determine prices,
products, and services in the securities
markets.43
The Exchange states that, in
Regulation NMS, the Commission
highlighted the importance of market
forces in determining prices and SRO
revenues and recognized that regulation
of the national market system ‘‘has been
38 See
Notice, 89 FR at 24071.
15 U.S.C. 78f(b)(4).
40 See Notice, 89 FR at 24071 (citing U.S.
Securities and Exchange Commission, ‘‘Staff
Guidance on SRO Rule filings Relating to Fees’’
(May 21, 2019), available at https://www.sec.gov/
tm/staff-guidance-sro-rule-filings-fees (‘‘Fee
Guidance’’) (‘‘If significant competitive forces
constrain the fee at issue, fee levels will be
presumed to be fair and reasonable, and the inquiry
is whether there is a substantial countervailing
basis to find that the fee terms nevertheless fail to
meet an applicable requirement of the Exchange Act
(e.g., that fees are equitably allocated, not unfairly
discriminatory, and not an undue burden on
competition).’’)).
41 The Exchange states that nothing in the Act
requires proof of product-by-product competition.
See Notice, 89 FR at 24071.
42 See Notice, 89 FR at 24071 (citing NetCoalition
v. SEC, 715 F.3d 342, 534–35 (D.C. Cir. 2013); H.R.
Rep. No. 94–229 at 92 (1975) (‘‘[I]t is the intent of
the conferees that the national market system
evolve through the interplay of competitive forces
as unnecessary regulatory restrictions are
removed.’’)).
43 See Notice, 89 FR at 24071.
khammond on DSKJM1Z7X2PROD with NOTICES
39 See
VerDate Sep<11>2014
18:43 May 24, 2024
Jkt 262001
46245
remarkably successful in promoting
market competition in its broader forms
that are most important to investors and
listed companies.’’ 44 The Exchange
further states that, as a result, the
Commission has long relied on
competitive forces to determine whether
a fee proposal is equitable, fair,
reasonable, and not unreasonably or
unfairly discriminatory.45 The
Exchanges states that, in 2008, the
Commission explained that ‘‘[i]f
competitive forces are operative, the
self-interest of the exchanges themselves
will work powerfully to constrain
unreasonable or unfair behavior’’ 46 and
in 2019, that the Commission Staff
reaffirmed that ‘‘[i]f significant
competitive forces constrain the fee at
issue, fee levels will be presumed to be
fair and reasonable . . . .’’ 47 The
Exchange explains that, accordingly,
‘‘the existence of significant competition
provides a substantial basis for finding
that the terms of an exchange’s fee
proposal are equitable, fair, reasonable,
and not unreasonably or unfairly
discriminatory.’’ 48 The Exchange states
that, consistent with the Commission’s
longstanding focus on competition,
Commission Staff have indicated that
they would only look at factors outside
of the competitive market if a ‘‘proposal
lacks persuasive evidence that the
proposed fee is constrained by
significant competitive forces.’’ 49
2. The Exchange Believes That Nothing
in the Act Requires an Examination of
Fees in Isolation
The Exchange states that the Act
mandates the ‘‘equitable allocation of
reasonable dues, fees, and other charges
among members and issuers and other
persons using its facilities,’’ 50 further
stating that this provision refers
generally to ‘‘reasonable dues, fees, and
other charges’’ as a whole, not
individual fees, and that nothing in the
Act requires the individual examination
of specific product fees in isolation.51
The Exchange states that evidence of
platform competition is sufficient to
show that the product operates in a
competitive environment, provided that
a proposed rule change does not in and
of itself undermine competition.52 The
Exchange finally states that a
determination of whether a proposal
permits unfair discrimination between
customers, issuers, brokers, or dealers
remains a separate product-specific
inquiry.53
44 See Notice, 89 FR at 24071 (citing Securities
Exchange Act Release No. 51808 (June 9, 2005), 70
FR 37496, 37499 (June 29, 2005) (‘‘Regulation NMS
Adopting Release’’)).
45 See Notice, 89 FR at 24071.
46 See Notice, 89 FR at 24071 (citing Securities
Exchange Act Release No. 59039 (December 2,
2008), 73 FR 74770 (December 9, 2008) (SR–
NYSEArca–2006–21)).
47 See Notice, 89 FR at 24071 (citing Fee
Guidance).
48 See id.
49 See id. The Exchange states that, in the Fee
Guidance, the Staff indicated that ‘‘[w]hen
reviewing rule filing proposals . . . [it] is mindful
of recent opinions by the D.C. Circuit,’’ including
Susquehanna International Group, LLP v. SEC, 866
F.3d 442 (D.C. Cir. 2017). See Notice, 89 FR at
24072. However, the Exchange believes that the
D.C. Circuit’s decision in Susquehanna is irrelevant
to the Commission’s review of immediately
effective SRO fee filings. See id. The Exchange
states that Susquehanna involved the Commission’s
approval of a rule proposed under Section 19(b)(2)
of the Act, not its evaluation of whether to
temporarily suspend an SRO’s immediately
effective fee filing under Section 19(b)(3). See id.
The Exchange believes that a comparison of
Sections 19(b)(2) and 19(b)(3) of the Act makes clear
that the Commission is not required to undertake
the same independent review, and make the same
findings and determinations, for Section 19(b)(3)
filings that it must for Section 19(b)(2) filings and,
Section 19(b)(2) requires the Commission to ‘‘find[ ]
that [a] proposed rule change is consistent with
the’’ Act before approving the rule. 15 U.S.C.
78s(b)(2)(C)(i). The Exchange states that Section
19(b)(3), by contrast, imbues the Commission with
discretion, stating that it ‘‘may temporarily
suspend’’ an immediately effective rule filing where
‘‘it appears to the Commission that such action is
necessary or appropriate.’’ See id. The Exchange
further states that, as the Supreme Court has
explained, statutes stating that an agency ‘‘may’’—
but need not—take certain action are ‘‘written in the
language of permission and discretion.’’ See id.
(citing S. Ry. Co. v. Seaboard Allied Milling, 442
U.S. 444, 455 (1979); see also Crooker v. SEC, 161
F.2d 944, 949 (1st Cir. 1947) (per curiam)). The
Exchange believes that the ‘‘contrast’’ between
Sections 19(b)(2) and 19(b)(3), the Commission
itself has explained, ‘‘reflects the fundamental
difference in the way Congress intended for
different types of rules to be treated’’ and (‘‘[W]hile
the Commission’s authority to suspend a fee under
Subsection (3)(C) is permissive, its duties under
Subsection (2) are stated in mandatory terms. See
Notice, 89 FR at 24072 (citing Brief of Respondent
SEC, NetCoalition v. SEC, 715 F.3d 342–43 (D.C.
Cir. 2013) (Nos. 10–1421 et al.).’’). Thus, the
Exchange argues that neither Susquehanna, nor
Section 19(b)(3) of the Act, requires the
Commission to make independent findings that an
immediately effective SRO fee filing such as this
one is consistent with the Act and, the Exchange
argues that to the degree that the Susquehanna
decision is applicable to any Commission action,
however, the court held that the Commission is
required to ‘‘itself find or determine’’ that a
proposal meets statutory requirements, explaining
that the Commission is ‘‘obligated to make an
independent review’’ of an SRO’s proposal, and not
rely solely on the work of the SRO. See Notice, 89
FR at 24072 (citing 866 F.3d at 446).
50 See 15 U.S.C. 78f(b)(4).
51 See Notice, 89 FR at 24072.
52 See id.
53 See id.
PO 00000
Frm 00191
Fmt 4703
Sfmt 4703
3. The Exchange Believes That the
Commission Has Recognized That
Exchanges Are Subject to Significant
Competitive Forces in the Market for
Order Flow
The Exchange states that the fact that
the market for order flow is competitive
has long been recognized by the
courts—citing specifically, the
E:\FR\FM\28MYN1.SGM
28MYN1
46246
Federal Register / Vol. 89, No. 103 / Tuesday, May 28, 2024 / Notices
NetCoalition v. Securities and Exchange
Commission statement, ‘‘[n]o one
disputes that competition for order flow
is ‘fierce.’ . . . As the SEC explained,
‘[i]n the U.S. national market system,
buyers and sellers of securities, and the
broker-dealers that act as their orderrouting agents, have a wide range of
choices of where to route orders for
execution’; [and] ‘no exchange can
afford to take its market share
percentages for granted’ because ‘no
exchange possesses a monopoly,
regulatory or otherwise, in the execution
of order flow from broker dealers.’ ’’ 54
4. The Exchange Believes That All
Exchange Products Are Subject to
Competition—Not Just Those Directly
Related to Order Flow
The Exchange states that competition
is not limited to order flow and that data
shows that the combination of explicit
all-in costs to trade and other implicit
costs has largely equalized the cost to
trade across venues.55 The Exchange
states that this is a function of the fact
that, if the all-in cost to the user of
interacting with an exchange exceeds
market price, customers can and do shift
their purchases and trading activity to
other exchanges, and therefore the
exchange must adjust one or more of its
fees to attract customers.56
The Exchange states that this
conclusion is particularly striking given
that different exchanges engage in a
variety of business models and offer an
array of pricing options to appeal to
different customer types; specifically,
that the largest exchanges operate
maker-taker platforms, offering rebates
to attract trading liquidity, which allows
khammond on DSKJM1Z7X2PROD with NOTICES
54 See
NetCoalition, 615 F.3d at 539 (D.C. Cir.
2010) (quoting Securities Exchange Act Release No.
59039 (December 2, 2008), 73 FR 74770, 74782–83
(December 9, 2008) (SR–NYSEArca–2006–21)). See
also Notice, 89 FR at 24072.
55 The Exchange states that competition across
platforms constrains platform fees and results in
‘‘all-in’’ costs becoming equal across platforms, but
that the Staff Guidance on SRO Rule Filings
Relating to Fees states that platform competition
requires that the ‘‘overall return of the platform,
rather than the return of any particular fees charged
to a type of customer, . . . be used to assess the
competitiveness of the platform’s market,’’ and that
‘‘[a]n SRO that wishes to rely on total platform
theory must provide evidence demonstrating that
competitive forces are sufficient to constrain the
SRO’s aggregate return across the platform.’’ See
Notice, 89 FR at 24072 (citing Fee Guidance
Exchange’s emphasis). The Exchange states that it
does not know, and cannot determine, whether
returns (as opposed to fees) are equalized across
platforms, because we do not have detailed cost
information from other exchanges. See id. The
Exchange believes that an analysis of returns,
however, is unnecessary to show that competition
constrains fees given that, platform competition can
be demonstrated solely by examining costs to users.
See id.
56 See Notice, 89 FR at 24072.
VerDate Sep<11>2014
18:43 May 24, 2024
Jkt 262001
them to maintain actionable quotes with
high liquidity and offer high-quality
market data.57 The Exchange further
states that the negative price charged to
liquidity providers through rebates is
part of the platform because it serves to
create features attractive to other
participants, including oftentimes tight
spreads, actionable and lit quotes, and
more valuable market data.58
The Exchange states that inverted
venues, in contrast, have the opposite
price structure—liquidity providers pay
to add liquidity, while liquidity takers
earn a rebate—these platforms offer less
liquidity, but better queue priority,
faster fills, and lower effective spreads
for investors.59 The Exchange states that
there are a wide range of other pricing
models and product offerings among the
dozens of lit and unlit trading venues
that compete in the marketplace in
addition to these examples.60 The
Exchange further states that different
strategies among exchanges also
manifest in the pricing of other services,
such as market data and connectivity.61
The Exchange states that some
exchanges charge for such services,
while others charge little or nothing
(typically because the exchange is new
or has little liquidity), just as some
exchanges charge a fee per trade, while
others pay rebates.62
In assessing competition for exchange
services, the Exchange explains that
‘‘we must consider not only explicit
costs, such as fees for trading, market
data, and connectivity, but also the
implicit costs of trading on an
exchange[ ]’’; and that ‘‘[t]he realized
spread, or markout, captures the
implicit cost to trade on a platform.’’ 63
57 See
id.
id.
59 See id.
60 See id.
61 See id.
62 See id.
63 The Exchange states that the concept of
markout was created by market makers trying to
capture the spread while providing a two-sided (bid
and offer) market. See Notice, 89 FR at 24072. The
Exchange states that, for market makers, being filled
on the bid or the offer can cause a loss if the fill
changes market prices. See id. (stating as an
example, a fill on a market maker’s bid just as the
stock price falls results in a ‘‘virtual loss,’’ because
the market maker has a long position with a new
bid lower than the fill). The Exchange states that
negative markouts can be beneficial. See Notice, 89
FR at 24072 (stating as an example, if an
institutional investor is working a large buy order,
negative markouts represent fills as the market falls,
allowing later orders to be placed sooner, and likely
at a better price, reducing the opportunity costs as
well as explicit cost of building the position). The
Exchange further states that data suggests that
market participants employ sophisticated analytic
tools to weigh the cost of immediate liquidity and
lower opportunity costs against better spread
capture (lower markouts) and explicit trading costs.
See Notice, 89 FR at 24073. The Exchange states
58 See
PO 00000
Frm 00192
Fmt 4703
Sfmt 4703
The Exchange further states that
considering both the explicit costs
charged by exchanges for their various
joint products and the implicit costs
incurred by traders to trade on various
exchanges, the data show that all-in
trading costs across exchanges are
largely equalized, regardless of different
trading strategies offered by each
platform for each individual service.64
The Exchange states that platform
competition has resulted in a
competitive environment in the market
for exchange services, in which trading
platforms are constrained by other
platforms’ offerings, taking into
consideration the all-in cost of
interacting with the platform.65 The
Exchange further states that this
constraint is a natural consequence of
competition and demonstrates that no
exchange platform can charge excessive
fees and expect to remain competitive,
thereby constraining fees on all
products sold as part of the platform.66
The Exchange finally states that the
existence of platform-level competition
also explains why some consumers
route orders to the exchange with the
highest explicit trading costs even
though other exchanges offer free or a
net rebate for trading.67
5. The Exchange Believes That
Exchanges Compete at Both the Platform
and Product Level
The Exchange states that its customers
are differentiated in the value they place
on the different products offered by
exchanges and in their willingness to
pay for those products.68 The Exchange
believes that this occurs both on a firmwide and a transaction basis; for
example, individual customers ‘‘multihome’’ on various platforms, and are
thus able to route different trades to
different platforms to take advantage of
favorable economics offered on a tradeto-trade basis.69
that, as discussed in greater detail in its Exhibit 3,
the venues with the highest explicit costs—
typically inverted and fee-fee venues—have the
lowest implicit costs from markouts and vice versa.
See id. The Exchange also states that higher positive
markouts mean more spread capture, but those
venues also tend to have the highest explicit costs,
and provide the least liquidity, and positive
externalities, to the market. See id.
64 See Notice, 89 FR at 24073.
65 See id.
66 See id.
67 The Exchange states that empirical evidence
also shows that market data is more valuable from
exchanges with more liquidity. According to the
Exchange, many customers decide not to take data
from smaller markets, even though they are free or
much lower cost than larger markets. See Notice, 89
FR at 24073.
68 See Notice, 89 FR at 24073.
69 See id.
E:\FR\FM\28MYN1.SGM
28MYN1
Federal Register / Vol. 89, No. 103 / Tuesday, May 28, 2024 / Notices
The Exchange believes that exchanges
compete by offering differentiated
packages of pricing and products to
attract different categories of customer,
and that, as in any competitive market,
consumers will ‘‘vote with their feet,’’
incentivizing platforms to supply an
array of pricing and product offerings
that suit diverse consumer needs far
more effectively than a uniform, onesize-fits-some rigid product offering.70
The Exchange further states that if an
exchange’s pricing for a particular
product gets out of line, such that its
total return is boosted above
competitive levels, market forces will
discipline that approach because
competing exchanges will quickly
attract customer volume through more
attractive all-in trading costs.71 In
addition, the Exchange states that if a
particular package of pricing and
products is not attractive to a sufficient
volume of customers in a particular
category, those customers may elect not
to purchase the service and that this is
why exchanges compete at a product
level, as well as based on all-in trading
costs.72
6. The Exchange Believes That
Exchanges Compete With Off-Exchange
Trading Platforms in Addition to Other
Exchanges
The Exchange states that, as the SEC
recently noted in its market
infrastructure proposal,73 the number of
transactions completed on nonexchange venues has been growing, and
allowing exchanges to compete as
platforms will help exchanges compete
against non-exchange venues, and, to
the degree order flow is shifted from
non-exchange to exchange venues,
overall market transparency will
improve.74 The Exchange states that
exchanges have a unique role to play in
market transparency because they
publish an array of pre- and post-trade
data that non-exchange venues, almost
entirely, do not. The Exchange further
states that greater transparency benefits
non-exchange venues by enabling them
to provide more accurate pricing to their
customers, and by helping such venues
set their own prices, benchmark,
70 See
id.
id.
72 See id.
73 See id. (citing Regulation NMS: Minimum
Pricing Increments, Access Fees, and Transparency
of Better Price Orders, Securities Exchange Act
Release No. 96494 (File No. S7–30–22)).
74 See Notice, 89 FR at 24073 (stating that nonexchange venues rely on market data distributed by
exchanges to set prices and greater transparency
allows both exchange and non-exchange venues to
operate more effectively and efficiently).
khammond on DSKJM1Z7X2PROD with NOTICES
71 See
VerDate Sep<11>2014
18:43 May 24, 2024
Jkt 262001
analyze the total cost of ownership, and
assess their own trading strategies.
The Exchange states that allowing
exchanges to compete effectively as
platforms has other positive network
effects: larger trading platforms offer
lower average trading costs; and as
trading platforms attract more liquidity,
bid-ask spreads tighten, search costs fall
(by limiting the number of venues that
a customer needs to check to assess the
market), and connection costs decrease,
as customers have no need to connect to
all venues.75 The Exchanges argues that
the whole is therefore greater (in the
sense that it is more efficient) than the
sum of the parts.76
The Exchange states that this is not to
say that smaller established trading
platforms do not have a role to play as
they provide specialized services that
cater to individual customer needs, but
that these specialized services help the
smaller exchanges grow by driving
liquidity to their platforms, and, if they
are successful, achieve the economies of
scale that benefit the larger
enterprises.77 The Exchange states that,
because the total costs of interacting
with an exchange are roughly equal,
smaller exchanges offset higher trading
costs with lower connectivity, market
data, or other fees.78 The Exchange
states that, while the mix of fees will
change as exchanges grow, the all-in
cost of interacting with the exchange
remains roughly the same.79 The
Exchange finally states that
acknowledging that exchanges compete
as platforms and approving fees
expeditiously on that basis will improve
the ability of exchanges to compete
against non-exchange venues, and, to
the degree order flow is shifted to
exchanges, both transparency and
efficiency will improve.80
7. The Exchange States That the
Proposed Fees Are Equitable and
Reasonable Because They Will Be
Subject to Competition
The Exchange states that intent of the
Proposal offering member firms an
incentive to display liquidity through
lower non-display and connectivity fees
is to generate a ‘‘virtuous cycle,’’ in
which the proposed fee structure will
attract more liquidity to the Exchange,
making it a more attractive trading
venue, and thereby attracting more
75 In addition, the Exchange states that its
experience shows that fewer customers connect
with smaller trading venues than with larger
venues. See Notice, 89 FR at 24073.
76 See Notice, 89 FR at 24073.
77 See id.
78 See id.
79 See id.
80 See id.
PO 00000
Frm 00193
Fmt 4703
Sfmt 4703
46247
liquidity.81 The Exchange states that
incentive programs have been widely
adopted by exchanges, and are
reasonable, equitable, and nondiscriminatory because they are open on
an equal basis to similarly situated
members and provide additional
benefits or discounts that are reasonably
related to the value to an exchange’s
market quality and activity.82 The
Exchange also states that the Proposal
will contribute to market quality
because it will help bring new order
flow to the Exchange and greater
displayed liquidity on the Exchange
offers investors deeper, more liquid
markets and execution opportunities.83
The Exchange states that increased
order flow benefits investors by
deepening the Exchange’s liquidity
pool, potentially providing greater
execution incentives and opportunities,
offering additional flexibility for all
investors to enjoy cost savings,
supporting the quality of price
discovery, promoting market
transparency, and lowering spreads
between bids and offers and thereby
lowering investor costs.84 The Exchange
states that, to the degree that liquidity
is attracted from dark venues, that
liquidity also increases transparency for
the market overall, providing investors
with more information about market
trends.85 The Exchange finally states
that the Proposal will help members
that meet the Minimum ADV threshold
maintain lower costs and will benefit
them through the many positive
externalities associated with a more
liquid exchange.86
The Exchange states that the
competition among exchanges as trading
81 See
id.
id. (citing as examples Securities Exchange
Act Release No. 92493 (July 26, 2021), 86 FR 41129
(July 30, 2021) (SR-CboeEDGX–2021–034) (proposal
to provide discount to new members that meet
certain volume thresholds, noting that ‘‘relative
volume-based incentives and discounts have been
widely adopted by exchanges . . . and are
reasonable, equitable and non-discriminatory
because they are open on an equal basis to similarly
situated members and provide additional benefits
or discounts that are reasonably related to (i) the
value to an exchange’s market quality and (ii)
associated higher levels of market activity . . . .’’)
and Securities Exchange Act Release No. 53790
(May 11, 2006), 71 FR 28738 (May 17, 2006) (SR–
Phlx–2006–04) (‘‘The Commission recognizes that
volume-based discounts of fees are not uncommon,
and where the discount can be applied objectively,
it is consistent with Rule 603. For the same reasons
noted above, the Commission believes that the fee
structure meets the standard in section 6(b)(4) of the
Act in that the proposed rule change provides for
the equitable allocation of reasonable dues, fees,
and other charges among the Exchange’s members
and issuers and other persons using its facilities.’’)).
83 See Notice, 89 FR at 24074.
84 See id.
85 See id.
86 See id.
82 See
E:\FR\FM\28MYN1.SGM
28MYN1
46248
Federal Register / Vol. 89, No. 103 / Tuesday, May 28, 2024 / Notices
platforms, as well as the competition
between exchanges and alternative
trading venues, constrain exchanges
from charging excessive fees for any
exchange products, including trading,
listings, ports, and market data.87 The
Exchange also states that the fees that
arise from the competition among
trading platforms may be too low
because they fail to reflect the benefits
to the market as a whole of exchange
products and services, allowing other
venues to free-ride on these investments
by the exchange platforms, increasing
fragmentation and search costs.88 The
Exchange believes that, as long as total
returns are constrained by competitive
forces there is no regulatory basis to be
concerned with pricing of particular
elements offered on a platform and that
regulatory constraints in this
environment are likely to reduce
consumer welfare by constraining
certain exchanges from offering
packages of pricing and products that
would be attractive to certain sets of
consumers, thus impeding competition
with venues that are not subject to the
same regulatory limitations and
reducing the benefits of competition to
customers.89
khammond on DSKJM1Z7X2PROD with NOTICES
8. The Exchange Believes That the
Proposal Is Not Unfairly Discriminatory
The Exchange states that the Proposal
is not unfairly discriminatory and that
Non-Display Usage and the Exchange’s
40Gb and 10Gb Ultra high-speed
connections will be offered to all
members and non-members on like
terms.90 The Exchanges states that it is
also not unfair to charge more to firms
that do not directly contribute order
flow to the Exchange, but nevertheless
benefit from that order flow through
tighter spreads, better prices, and the
other advantages of a more liquid
platform.91 The Exchange also states
that, specifically, the Proposal is not
unfairly discriminatory with respect to
either members or non-members.92 The
Exchange states that, with respect to
members, all members that meet the
ADV threshold will be charged lower
fees; and with respect to smaller
members, Nasdaq offers rebates to
members that offer displayed
liquidity.93 The Exchange states that,
with these rebates, any member—even
smaller members—should have the
87 See
id.
id.
89 See id.
90 See Notice, 89 FR at 24074.
91 See id.
92 See id.
93 See id.
88 See
VerDate Sep<11>2014
18:43 May 24, 2024
Jkt 262001
ability to post sufficient displayed
liquidity to meet the ADV threshold.94
The Exchange states that the Proposal
is not unfairly discriminatory with
respect to non-member broker-dealers,
which include brokers routing trades
through members and off-exchange
trading platforms that use exchange data
to execute trades, because they have the
option of becoming members to obtain
lower fees under the Proposal, and
because they realize the benefits of
higher liquidity—including tighter
spreads and better prices—and it is not
unfair discrimination to charge a higher
fee for that benefit.95 The Exchange
further states that the Proposal is not
unfairly discriminatory with respect to
non-member firms that are not brokerdealers, such as market data vendors
and index providers, because they also
benefit from the value that the
additional liquidity generated by this
Proposal will provide to the trading
platform.96 The Exchange states that,
incentivizing higher levels of liquidity
enhances and enriches the market data
distributed to the industry, and
increases the overall value of platform
and that is not unfair for such parties to
pay a higher fee to reflect the greater
value of the platform.97 The Exchange
states that discounts for specific
categories of market participants are
well-established; examples include nonprofessional fees, broker-dealer
enterprise licenses, and a media
enterprise license.98
B. Suspension
To date, the Commission has received
one comment letter on the proposed
rule change, and the letter opposes the
proposed rule change.99 The commenter
states, among other concerns, that the
Exchange mischaracterizes the Proposal
as a discount instead of a fee increase
on some participants, and does not
include sufficient or meaningful data or
justification to support the fee increase
or the tying of costs from one product
(market data) to another product
(transactions).100 The commenter also
states that the Proposal is
discriminatory, an undue burden on
id.
id.
96 See id.
97 See id.
98 See also id. (citing as an example The Nasdaq
Stock Market, Price List—U.S. Equities, available at
https://www.nasdaqtrader.com/Trader.aspx?
id=DPUSData (providing discounts for NonProfessional subscribers for Nasdaq TotalView and
other market data products, enterprise licenses for
broker-dealers for multiple market data products,
and a digital media enterprise license for Nasdaq
Basic)).
99 See HMA Letter, supra n. 5.
100 See id. at 4–5.
competition, and inconsistent with a
past Commission order disapproving a
Nasdaq proposed rule change.101
When exchanges file their proposed
rule changes with the Commission,
including fee filings like the Exchange’s
present Proposal, they are required to
provide a statement supporting the
proposal’s basis under the Act and the
rules and regulations thereunder
applicable to the exchange.102 The
instructions to Form 19b–4, on which
exchanges file their proposed rule
changes, specify that such statement
‘‘should be sufficiently detailed and
specific to support a finding that the
proposed rule change is consistent with
[those] requirements.’’ 103
Section 6 of the Act, including
Sections 6(b)(4), (5), and (8), require the
rules of an exchange to: (1) provide for
the equitable allocation of reasonable
fees among members, issuers, and other
persons using the exchange’s
facilities; 104 (2) perfect the mechanism
of a free and open market and a national
market system, protect investors and the
public interest, and not be designed to
permit unfair discrimination between
customers, issuers, brokers, or
dealers; 105 and (3) not impose any
burden on competition not necessary or
appropriate in furtherance of the
purposes of the Act.106
In temporarily suspending the
Exchange’s proposed rule change, the
Commission intends to further consider
whether the Proposal to increase market
data and connectivity fees for
participants who do not maintain the
minimum average daily displayed
volume threshold is consistent with the
statutory requirements applicable to a
national securities exchange under the
Act. In particular, the Commission will
consider whether the proposed rule
change satisfies the standards under the
Act and the rules thereunder requiring,
among other things, that an exchange’s
rules provide for the equitable
allocation of reasonable fees among
members, issuers, and other persons
using its facilities; not permit unfair
discrimination between customers,
issuers, brokers or dealers; and do not
impose any burden on competition not
94 See
95 See
PO 00000
Frm 00194
Fmt 4703
Sfmt 4703
101 See id. at 5–8 (citing Securities Exchange Act
Release No. 65362 (September 20, 2011), 76 FR
59466 (September 26. 2011) (SR–Nasdaq–2011–010)
(Order Disapproving a Proposed Rule Change to
Link Market Data Fees and Transaction Execution
Fees)).
102 See 17 CFR 240.19b–4 (Item 3 entitled ‘‘SelfRegulatory Organization’s Statement of the Purpose
of, and Statutory Basis for, the Proposed Rule
Change’’).
103 See id.
104 15 U.S.C. 78f(b)(4).
105 15 U.S.C. 78f(b)(5).
106 15 U.S.C. 78f(b)(8).
E:\FR\FM\28MYN1.SGM
28MYN1
Federal Register / Vol. 89, No. 103 / Tuesday, May 28, 2024 / Notices
necessary or appropriate in furtherance
of the purposes of the Act.107
Therefore, the Commission finds that
it is appropriate in the public interest,
for the protection of investors, and
otherwise in furtherance of the purposes
of the Act, to temporarily suspend the
proposed rule change.108
IV. Proceedings To Determine Whether
To Approve or Disapprove the
Proposed Rule Change
khammond on DSKJM1Z7X2PROD with NOTICES
In addition to temporarily suspending
the Proposal, the Commission also
hereby institutes proceedings pursuant
to Sections 19(b)(3)(C) 109 and
19(b)(2)(B) of the Act 110 to determine
whether the Exchange’s proposed rule
change should be approved or
disapproved. 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 rule change to inform the
Commission’s analysis of whether to
approve or disapprove the proposed
rule change.
Pursuant to Section 19(b)(2)(B) of the
Act,111 the Commission is providing
notice of the grounds for possible
disapproval under consideration:
• Whether the Exchange has
demonstrated how the proposed fees are
consistent with Section 6(b)(4) of the
Act, which requires that the rules of a
national securities exchange ‘‘provide
for the equitable allocation of reasonable
dues, fees, and other charges among its
members and issuers and other persons
using its facilities’’; 112
• Whether the Exchange has
demonstrated how the proposed fees are
consistent with Section 6(b)(5) of the
107 See 15 U.S.C. 78f(b)(4), (5), and (8),
respectively.
108 For purposes of temporarily suspending the
proposed rule change, the Commission has
considered the proposed rule’s impact on
efficiency, competition, and capital formation. See
15 U.S.C. 78c(f).
109 15 U.S.C. 78s(b)(3)(C). Once the Commission
temporarily suspends a proposed rule change,
Section 19(b)(3)(C) of the Act requires that the
Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule
change should be approved or disapproved.
110 15 U.S.C. 78s(b)(2)(B).
111 Id. Section 19(b)(2)(B) of the Act also provides
that proceedings to determine whether to
disapprove a proposed rule change must be
concluded within 180 days of the date of
publication of notice of the filing of the proposed
rule change. See id. The time for conclusion of the
proceedings may be extended for up to 60 days if
the Commission finds good cause for such
extension and publishes its reasons for so finding,
or if the exchange consents to the longer period. See
id.
112 15 U.S.C. 78f(b)(4).
VerDate Sep<11>2014
18:43 May 24, 2024
Jkt 262001
Act, which requires, among other
things, that the rules of a national
securities exchange not be ‘‘designed to
permit unfair discrimination between
customers, issuers, brokers, or
dealers’’; 113 and
• Whether the Exchange has
demonstrated how the proposed fees are
consistent with Section 6(b)(8) of the
Act, which requires that the rules of a
national securities exchange ‘‘not
impose any burden on competition not
necessary or appropriate in furtherance
of the purposes of [the Act].’’ 114
As discussed in Section III above, the
Exchange made various arguments in
support of the Proposal. There are
questions as to whether the Exchange
has provided sufficient information to
demonstrate that the proposed fees are
consistent with the Act and the rules
thereunder. The Commission will
specifically consider, among other
things, whether the Exchange has
provided sufficient information to
demonstrate that the Exchange is subject
to significant competitive forces when
setting the proposed market data and
connectivity fees in order to justify that
those fees are fair and reasonable. The
Commission will also consider whether
the Exchange has provided sufficient
information to demonstrate that tying
the proposed market data and
connectivity fees to a minimum average
daily display volume threshold is not an
undue burden on competition or is not
unfairly discriminatory.
Under the Commission’s Rules of
Practice, the ‘‘burden to demonstrate
that a proposed rule change is
consistent with the [Act] and the rules
and regulations issued thereunder . . .
is on the [SRO] that proposed the rule
change.’’ 115 The description of a
proposed rule change, 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,116 and
any failure of an SRO to provide this
information may result in the
Commission not having a sufficient
basis to make an affirmative finding that
a proposed rule change is consistent
with the Act and the applicable rules
and regulations.117
The Commission is instituting
proceedings to allow for additional
consideration and comment on the
issues raised herein, including as to
whether the proposed fees are
113 15
U.S.C. 78f(b)(5).
U.S.C. 78f(b)(8).
115 17 CFR 201.700(b)(3).
116 See id.
117 See id.
114 15
PO 00000
Frm 00195
Fmt 4703
Sfmt 4703
46249
consistent with the Act, and
specifically, with its requirements that
exchange fees be reasonable and
equitably allocated, not be unfairly
discriminatory, and not impose any
burden on competition that is not
necessary or appropriate in furtherance
of the purposes of the Act.118
V. Commission’s Solicitation of
Comments
The Commission requests written
views, data, and arguments with respect
to the concerns identified above as well
as any other relevant concerns. Such
comments should be submitted by June
18, 2024. Rebuttal comments should be
submitted by July 2, 2024. 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 19b–4, any
request for an opportunity to make an
oral presentation.119
The Commission asks that
commenters address the sufficiency and
merit of the Exchange’s statements in
support of the Proposal, in addition to
any other comments they may wish to
submit about the proposed rule change.
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
NASDAQ–2024–016 on the subject line.
Paper Comments
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–NASDAQ–2024–016. 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
118 See
15 U.S.C. 78f(b)(4), (5), and (8).
U.S.C. 78s(b)(2). Section 19(b)(2) of the Act
grants the Commission flexibility to determine what
type of proceeding—either oral or notice and
opportunity for written comments—is appropriate
for consideration of a particular proposal by an
SRO. See Securities Acts Amendments of 1975,
Report of the Senate Committee on Banking,
Housing and Urban Affairs to Accompany S. 249,
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
119 15
E:\FR\FM\28MYN1.SGM
28MYN1
46250
Federal Register / Vol. 89, No. 103 / Tuesday, May 28, 2024 / Notices
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
a.m. and 3 p.m. Copies of the filing also
will be available for inspection and
copying at the principal office of the
Exchange. Do not include personal
identifiable information in submissions;
you should submit only information
that you wish to make available
publicly. We may redact in part or
withhold entirely from publication
submitted material that is obscene or
subject to copyright protection. All
submissions should refer to file number
SR–NASDAQ–2024–016 and should be
submitted on or before June 18, 2024.
Rebuttal comments should be submitted
by July 2, 2024.
VI. Conclusion
It is therefore ordered, pursuant to
Section 19(b)(3)(C) of the Act,120 that
File No. SR–NASDAQ–2024–016, be
and hereby is, temporarily suspended.
In addition, the Commission is
instituting proceedings to determine
whether the proposed rule change
should be approved or disapproved.
Percent
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.121
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–11581 Filed 5–24–24; 8:45 am]
BILLING CODE 8011–01–P
SMALL BUSINESS ADMINISTRATION
khammond on DSKJM1Z7X2PROD with NOTICES
[Disaster Declaration #20276 and #20277;
HAWAII Disaster Number HI–20002]
Administrative Declaration of a
Disaster for the State of Hawaii
U.S. Small Business
Administration.
ACTION: Notice.
AGENCY:
120 15
121 17
U.S.C. 78s(b)(3)(C).
CFR 200.30–3(a)(57).
VerDate Sep<11>2014
18:43 May 24, 2024
Jkt 262001
This is a notice of an
Administrative declaration of a disaster
for the State of Hawaii dated 05/21/
2024.
Incident: Severe Storms, Flooding and
Landslide.
Incident Period: 04/11/2024 through
04/12/2024.
DATES: Issued on 05/21/2024.
Physical Loan Application Deadline
Date: 07/22/2024.
Economic Injury (EIDL) Loan
Application Deadline Date: 02/21/2025.
ADDRESSES: Visit the MySBA Loan
Portal at https://lending.sba.gov to
apply for a disaster assistance loan.
FOR FURTHER INFORMATION CONTACT:
Alan Escobar, Office of Disaster
Recovery & Resilience, 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
Administrator’s disaster declaration,
applications for disaster loans may be
submitted online using the MySBA
Loan Portal https://lending.sba.gov or
other locally announced locations.
Please contact the SBA disaster
assistance customer service center by
email at disastercustomerservice@
sba.gov or by phone at 1–800–659–2955
for further assistance.
The following areas have been
determined to be adversely affected by
the disaster:
Primary Counties: Kauai
Contiguous Counties:
Hawaii: Hawaii, Honolulu, Kalawao,
Maui.
The Interest Rates are:
SUMMARY:
For Physical Damage:
Homeowners with Credit Available Elsewhere ......................
Homeowners without Credit
Available Elsewhere ..............
Businesses with Credit Available Elsewhere ......................
Businesses without Credit
Available Elsewhere ..............
Non-Profit Organizations with
Credit Available Elsewhere ...
Non-Profit Organizations without Credit Available Elsewhere .....................................
For Economic Injury:
Business and Small Agricultural
Cooperatives without Credit
Available Elsewhere ..............
Non-Profit Organizations without Credit Available Elsewhere .....................................
5.375
2.688
8.000
4.000
The State which received an EIDL
Declaration is Hawaii.
(Catalog of Federal Domestic Assistance
Number 59008)
Isabella Guzman,
Administrator.
[FR Doc. 2024–11570 Filed 5–24–24; 8:45 am]
BILLING CODE 8026–09–P
SMALL BUSINESS ADMINISTRATION
Reporting and Recordkeeping
Requirements under OMB Review
Small Business Administration.
30-day notice.
AGENCY:
ACTION:
The Small Business
Administration (SBA) is seeking
approval from the Office of Management
and Budget (OMB) for the information
collection described below. In
accordance with the Paperwork
Reduction Act and OMB procedures,
SBA is publishing this notice to allow
all interested member of the public an
additional 30 days to provide comments
on the proposed collection of
information.
SUMMARY:
Submit comments on or before
June 27, 2024.
ADDRESSES: Written comments and
recommendations for this information
collection request should be sent within
30 days of publication of this notice to
www.reginfo.gov/public/do/PRAMain.
Find this particular information
collection request by selecting ‘‘Small
Business Administration’’; ‘‘Currently
Under Review,’’ then select the ‘‘Only
Show ICR for Public Comment’’
checkbox. This information collection
can be identified by title and/or OMB
Control Number.
FOR FURTHER INFORMATION CONTACT: You
may obtain a copy of the information
collection and supporting documents
from the Agency Clearance Office at
Curtis.Rich@sba.gov; (202) 205–7030, or
from www.reginfo.gov/public/do/
PRAMain
DATES:
SBA Form
1149, Lenders Transcript of Account is
completed by Lenders when requesting
SBA to purchase the guaranty portion of
3.250 a loan. At that time, Lenders are
required to supply the Agency with a
certified transcript of the loan account.
4.000 SBA Form 1149 is a uniform and
convenient means for lenders to report
and certify loan accounts to purchase by
3.250 SBA. The Agency uses the information
to determine date of loan default and
The number assigned to this disaster
whether Lender disbursed and serviced
for physical damage is 202766 and for
the loan according to Loan Guaranty
economic injury is 202770.
agreement.
PO 00000
Frm 00196
Fmt 4703
Sfmt 4703
SUPPLEMENTARY INFORMATION:
3.250
E:\FR\FM\28MYN1.SGM
28MYN1
]]>Agencies
[Federal Register Volume 89, Number 103 (Tuesday, May 28, 2024)]
[Notices]
[Pages 46243-46250]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-11581]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-100188; File No. SR-NASDAQ-2024-016]
Self-Regulatory Organizations; The Nasdaq Stock Market LLC;
Suspension of and Order Instituting Proceedings To Determine Whether To
Approve or Disapprove Proposed Rule Change To Increase Fees for Certain
Market Data and Connectivity Products and To Maintain the Current Fees
for Such Products if Members Meet a Minimum Average Daily Displayed
Volume Threshold
May 21, 2024.
I. Introduction
On March 22, 2024, The Nasdaq Stock Market LLC (``Nasdaq'' or
``Exchange'') filed with the Securities and Exchange Commission
(``Commission'' or ``SEC''), pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934 (``Act''),\1\ and Rule 19b-4
thereunder,\2\ a proposed rule change (File Number SR-NASDAQ-2024-016)
to increase fees for certain market data and connectivity products and
to maintain the current fees for such products if members meet a
minimum average daily displayed volume threshold (``Proposal''). The
proposed rule change was immediately effective upon filing with the
Commission pursuant to Section 19(b)(3)(A) of the Act.\3\ The proposed
rule change was published for comment in the Federal Register on April
1, 2024.\4\ The Commission has received one comment letter on the
proposed rule change.\5\ Pursuant to Section 19(b)(3)(C) of the Act,\6\
the Commission is hereby: (1) temporarily suspending the proposed rule
change; and (2) instituting proceedings to determine whether to approve
or disapprove the proposed rule change.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
\3\ 15 U.S.C. 78s(b)(3)(A). A proposed rule change may take
effect upon filing with the Commission if it is designated by the
exchange as ``establishing or changing a due, fee, or other charge
imposed by the self-regulatory organization on any person, whether
or not the person is a member of the self-regulatory organization.''
15 U.S.C. 78s(b)(3)(A)(ii).
\4\ See Securities Exchange Act Release No. 99879 (April 5,
2024), 89 FR 24070 (``Notice'').
\5\ See Letter from Tyler Gellasch, President and CEO, Healthy
Markets Association, to Vanessa Countryman, Secretary, Commission,
dated April 24, 2024 (``HMA Letter''). Comments received on the
Proposal are available at https://www.sec.gov/comments/sr-nasdaq-2024-016/srnasdaq2024016.htm.
\6\ 15 U.S.C. 78s(b)(3)(C).
---------------------------------------------------------------------------
II. Background and Description of the Proposed Rule Change
The Exchange states that the purpose of the proposed rule change is
to reward firms that meet a minimum average daily displayed volume with
lower fees for Non-Display Usage and the Exchange's 40Gb and 10Gb Ultra
high-speed connection to the Exchange.\7\ The Exchange explains that
Non-Display fees are currently assessed on a per-subscriber \8\ or per-
firm basis.\9\ Monthly fees are $375 per Subscriber for 1-39
subscribers; $15,000 per firm for 40-99 subscribers; $30,000 per firm
for 100-249 subscribers; and $75,000 per firm for 250 or more
subscribers.\10\ Under the proposed rule change, a member firm that
meets the minimum ADV threshold discussed below would continue to pay
those fees.\11\ The Exchange further states that firms that do not meet
the minimum ADV threshold, however, as well as non-member firms, would
pay the new monthly fees of $500 per subscriber for 1-39 subscribers;
$20,000 per firm for 40-99 subscribers; $40,000 per firm for 100-249
subscribers; and $100,000 per firm for 250 or more subscribers.\12\
---------------------------------------------------------------------------
\7\ This proposed rule change was initially filed on March 6,
2024, as SR-Nasdaq-2024-011. On March 20, 2024, that filing was
withdrawn and replaced with SR-Nasdaq-2024-015. On March 22, 2024,
SR-Nasdaq-2024-015 was withdrawn and replaced with the instant
filing due to a technical error. See Notice, 89 FR at 24070.
\8\ ``Subscriber'' is defined as a device or computer terminal
or an automated service which is entitled to receive information.
See Notice, 89 FR at 24070.
\9\ See Notice, 89 FR at 24070.
\10\ See id.
\11\ See id.
\12\ See id. (stating that Non-Display Usage is any method of
accessing Nasdaq U.S. information that involves access or use by a
machine or automated device without access or use of a display by a
natural person and that examples of Non-Display Usage include, but
are not limited to: Automated trading; Automated order/quote
generation and/or order/quote pegging; Price referencing for use in
algorithmic trading; Price referencing for use in smart order
routing; Program trading and high frequency trading; Order
verification; Automated surveillance programs; Risk management;
Automatic order cancellation, or automatic error discovery; Clearing
and settlement activities; Account maintenance (e.g., controlling
margin for a customer account); and ``Hot'' disaster recovery). The
Exchange also states that, although either top-of-book or depth-of-
book data can be used for Non-Display Usage, the Proposal modifies
fees for depth-of-book data only. See Notice, 89 FR at 24070 (citing
Equity 7, Section 123 (Nasdaq Depth-of-Book data)).
---------------------------------------------------------------------------
[[Page 46244]]
Nasdaq states that it offers customers the opportunity to co-locate
their servers and equipment within the Nasdaq Data Center,\13\ allowing
participants an opportunity to reduce latency and network
complexity.\14\ Nasdaq offers a variety of connectivity options to fit
a firm's specific networking needs, including the high-speed 40Gb and
10Gb Ultra networks.\15\ The Exchange further states that all of its
colocation and connectivity options offer customers access to any or
all Nasdaq exchanges through a single connection.\16\
---------------------------------------------------------------------------
\13\ See Notice, 89 FR at 24070 (citing Nasdaq Co-Location
(CoLo) Services, available at https://www.nasdaqtrader.com/trader.aspx?id=colo; Stock Exchange Data Center & Trading, available
at https://www.nasdaq.com/solutions/nasdaq-co-location).
\14\ See Notice, 89 FR at 24070.
\15\ See id.
\16\ See id. (citing Securities Exchange Act Release No. 84571
(November 9, 2018), 83 FR 57758 (November 16, 2018) (SR-Nasdaq-2018-
086)). Nasdaq also states, as an example, that a firm that is a
member of all six Nasdaq exchanges that purchases services in the
Nasdaq Data Center such as a 40G fiber connection, cabinet space,
cooling fans, and patch cables only purchases these products or
services once to use them for all six Nasdaq exchanges. See Notice,
89 FR at 24070.
---------------------------------------------------------------------------
Nasdaq currently charges members an ongoing monthly fee of $21,100
for the 40Gb fiber connection and $15,825 for the 10Gb Ultra connection
to the Nasdaq exchanges.\17\ Under the proposed rule change, a firm
that meets the minimum ADV threshold would continue to pay those
fees.\18\ Member firms that do not meet the minimum ADV threshold
discussed below, as well as non-member firms, would pay the new monthly
fee of $23,700 for the 40Gb fiber connection and $17,800 for the 10Gb
Ultra connection.\19\
---------------------------------------------------------------------------
\17\ See Notice, 89 FR at 24070.
\18\ See id.
\19\ See id.
---------------------------------------------------------------------------
The Proposal introduces the new term ``Minimum ADV,'' which will
mean the introduction by a member of at least one million shares of
added executed displayed liquidity on average per trading day in all
securities through one or more of the member's market participant
identifiers (``MPIDs'') on the Nasdaq Market Center.\20\ Average daily
volume is calculated as the total volume of shares executed for all
added displayed orders in all securities during the trading month
divided by the number of trading days in that month, averaged over the
six-month period preceding the billing month, or the date the firm
became a member, whichever is shorter. New members will be deemed to
meet the Minimum ADV for the first month of operation.\21\ Minimum ADV
excludes sponsored access by a member on behalf of a third party.\22\
Nasdaq states that the Minimum ADV threshold was designed to be
accessible to all members to promote wide engagement with the
Exchange.\23\
---------------------------------------------------------------------------
\20\ See id.
\21\ See id. at 24070-1.
\22\ See id. at 24071.
\23\ See id.
---------------------------------------------------------------------------
Nasdaq states that it does not expect any member to be
disadvantaged by the Proposal. Nasdaq is a maker-taker platform and
offers rebates to members that offer displayed liquidity.\24\ With
these rebates, Nasdaq states that no member should have any difficulty
posting and executing sufficient displayed liquidity to meet the ADV
threshold.\25\ Nasdaq further states that the threshold is set at a
level that Nasdaq believes any member--even smaller members--should be
able to meet without significant effort.\26\ Nasdaq states that,
because the threshold applies to displayed liquidity only, the Proposal
should not impact the Best Execution obligations of any member.\27\
Nasdaq believes that, if all members were to meet this threshold, the
Proposal would add an incremental 60-80 million shares to Nasdaq's
accessible liquidity.\28\ Nasdaq states that non-members that do not
post displayed liquidity to the market would pay the higher fees
because the non-members do not directly contribute order flow to the
Exchange, but nevertheless benefit from that order flow through tighter
spreads, better prices, and the other advantages of a more liquid
platform.\29\
---------------------------------------------------------------------------
\24\ See id.
\25\ See id.
\26\ See id.
\27\ See id.
\28\ See id.
\29\ See id.
---------------------------------------------------------------------------
III. Suspension of the Proposed Rule Change
Pursuant to Section 19(b)(3)(C) of the Act,\30\ at any time within
60 days of the date of filing of an immediately effective proposed rule
change pursuant to Section 19(b)(1) of the Act,\31\ the Commission
summarily may temporarily suspend the change in the rules of a self-
regulatory organization (``SRO'') if it appears to the Commission that
such action is necessary or appropriate in the public interest, for the
protection of investors, or otherwise in furtherance of the purposes of
the Act. The Commission believes a temporary suspension of the proposed
rule change is necessary and appropriate to allow for additional
analysis of the proposed rule change's consistency with the Act and the
rules thereunder.
---------------------------------------------------------------------------
\30\ 15 U.S.C. 78s(b)(3)(C).
\31\ 15 U.S.C. 78s(b)(1).
---------------------------------------------------------------------------
A. Exchange Statements In Support of the Proposal
In support of the Proposal, the Exchange states that exchanges,
like all trading venues, compete as platforms.\32\ All elements of the
platform--trade executions, market data, connectivity, membership, and
listings--operate in concert.\33\ Trade executions increase the value
of market data; market data functions as an advertisement for on-
exchange trading; listings increase the value of trade executions and
market data; and greater liquidity on the exchange enhances the value
of ports and colocation services.\34\ The Exchange states that the
Proposal is designed to promote competition by providing an incentive
for members to provide liquidity (therefore attracting investors and
increasing the overall value of the platform) through charging lower
fees for other platform services (i.e., market data and
connectivity).\35\ The Exchange states that this will lead to more
displayed liquidity on the Exchange, enhancing and enriching the market
data distributed to the industry, which then increases the amount of
interest in the platform.\36\ The Exchange states that this will also
enable it to offer investors a more robust, lower cost-trading
experience through tighter spreads and more efficient trading, placing
it in a better competitive position relative to other exchanges and
trading venues.\37\
---------------------------------------------------------------------------
\32\ See Notice, 89 FR at 24071.
\33\ See id.
\34\ See id. The Exchange also states that it attached to the
filing with the Commission a data-based analysis demonstrating how
platform competition works entitled ``How Exchanges Compete: An
Economic Analysis of Platform Competition'' as Exhibit 3, explaining
that exchanges are multi-sided platforms, whose value is dependent
on attracting users to multiple sides of the platform. See id. The
Exchange states that issuers need investors, and every trade
requires two sides to trade, and to make its platform attractive to
multiple constituencies, an exchange must consider inter-side
externalities, meaning demand for one set of platform services
depends on the demand for other services. See id.
\35\ See Notice, 89 FR at 24071.
\36\ See id.
\37\ See id. The Exchange further states that, to the degree
that the additional liquidity is moved from off-exchange venues to
on-exchange platforms, overall market transparency will improve as
well. See id.
---------------------------------------------------------------------------
[[Page 46245]]
1. The Exchange Believes that Fees Produced in a Competitive
Environment are an Equitable Allocation of Reasonable Dues, Fees, and
Other Charges
The Exchange states that reliance on competitive solutions is
fundamental to the Act.\38\ The Exchange further states that
significant competitive forces constrain fees, fee levels meet the
Act's standard for the ``equitable allocation of reasonable dues, fees,
and other charges among members and issuers and other persons using its
facilities,'' \39\ unless there is a substantial countervailing basis
to find that a fee does not meet some other requirement of the Act.\40\
The Exchange states that evidence of platform competition demonstrates
that each exchange product is sold in a competitive environment, and
its fees will be an equitable allocation of reasonable dues, fees, and
other charges, provided that nothing about the product or its fee
structure impairs competition.\41\
---------------------------------------------------------------------------
\38\ See Notice, 89 FR at 24071.
\39\ See 15 U.S.C. 78f(b)(4).
\40\ See Notice, 89 FR at 24071 (citing U.S. Securities and
Exchange Commission, ``Staff Guidance on SRO Rule filings Relating
to Fees'' (May 21, 2019), available at https://www.sec.gov/tm/staff-guidance-sro-rule-filings-fees (``Fee Guidance'') (``If significant
competitive forces constrain the fee at issue, fee levels will be
presumed to be fair and reasonable, and the inquiry is whether there
is a substantial countervailing basis to find that the fee terms
nevertheless fail to meet an applicable requirement of the Exchange
Act (e.g., that fees are equitably allocated, not unfairly
discriminatory, and not an undue burden on competition).'')).
\41\ The Exchange states that nothing in the Act requires proof
of product-by-product competition. See Notice, 89 FR at 24071.
---------------------------------------------------------------------------
The Exchange states that Congress directed the Commission to ``rely
on `competition, whenever possible, in meeting its regulatory
responsibilities for overseeing the SROs and the national market
system,' '' \42\ and, following this mandate, that the Commission and
the courts have repeatedly expressed their preference for competition
over regulatory intervention to determine prices, products, and
services in the securities markets.\43\
---------------------------------------------------------------------------
\42\ See Notice, 89 FR at 24071 (citing NetCoalition v. SEC, 715
F.3d 342, 534-35 (D.C. Cir. 2013); H.R. Rep. No. 94-229 at 92 (1975)
(``[I]t is the intent of the conferees that the national market
system evolve through the interplay of competitive forces as
unnecessary regulatory restrictions are removed.'')).
\43\ See Notice, 89 FR at 24071.
---------------------------------------------------------------------------
The Exchange states that, in Regulation NMS, the Commission
highlighted the importance of market forces in determining prices and
SRO revenues and recognized that regulation of the national market
system ``has been remarkably successful in promoting market competition
in its broader forms that are most important to investors and listed
companies.'' \44\ The Exchange further states that, as a result, the
Commission has long relied on competitive forces to determine whether a
fee proposal is equitable, fair, reasonable, and not unreasonably or
unfairly discriminatory.\45\ The Exchanges states that, in 2008, the
Commission explained that ``[i]f competitive forces are operative, the
self-interest of the exchanges themselves will work powerfully to
constrain unreasonable or unfair behavior'' \46\ and in 2019, that the
Commission Staff reaffirmed that ``[i]f significant competitive forces
constrain the fee at issue, fee levels will be presumed to be fair and
reasonable . . . .'' \47\ The Exchange explains that, accordingly,
``the existence of significant competition provides a substantial basis
for finding that the terms of an exchange's fee proposal are equitable,
fair, reasonable, and not unreasonably or unfairly discriminatory.''
\48\ The Exchange states that, consistent with the Commission's
longstanding focus on competition, Commission Staff have indicated that
they would only look at factors outside of the competitive market if a
``proposal lacks persuasive evidence that the proposed fee is
constrained by significant competitive forces.'' \49\
---------------------------------------------------------------------------
\44\ See Notice, 89 FR at 24071 (citing Securities Exchange Act
Release No. 51808 (June 9, 2005), 70 FR 37496, 37499 (June 29, 2005)
(``Regulation NMS Adopting Release'')).
\45\ See Notice, 89 FR at 24071.
\46\ See Notice, 89 FR at 24071 (citing Securities Exchange Act
Release No. 59039 (December 2, 2008), 73 FR 74770 (December 9, 2008)
(SR-NYSEArca-2006-21)).
\47\ See Notice, 89 FR at 24071 (citing Fee Guidance).
\48\ See id.
\49\ See id. The Exchange states that, in the Fee Guidance, the
Staff indicated that ``[w]hen reviewing rule filing proposals . . .
[it] is mindful of recent opinions by the D.C. Circuit,'' including
Susquehanna International Group, LLP v. SEC, 866 F.3d 442 (D.C. Cir.
2017). See Notice, 89 FR at 24072. However, the Exchange believes
that the D.C. Circuit's decision in Susquehanna is irrelevant to the
Commission's review of immediately effective SRO fee filings. See
id. The Exchange states that Susquehanna involved the Commission's
approval of a rule proposed under Section 19(b)(2) of the Act, not
its evaluation of whether to temporarily suspend an SRO's
immediately effective fee filing under Section 19(b)(3). See id. The
Exchange believes that a comparison of Sections 19(b)(2) and
19(b)(3) of the Act makes clear that the Commission is not required
to undertake the same independent review, and make the same findings
and determinations, for Section 19(b)(3) filings that it must for
Section 19(b)(2) filings and, Section 19(b)(2) requires the
Commission to ``find[ ] that [a] proposed rule change is consistent
with the'' Act before approving the rule. 15 U.S.C. 78s(b)(2)(C)(i).
The Exchange states that Section 19(b)(3), by contrast, imbues the
Commission with discretion, stating that it ``may temporarily
suspend'' an immediately effective rule filing where ``it appears to
the Commission that such action is necessary or appropriate.'' See
id. The Exchange further states that, as the Supreme Court has
explained, statutes stating that an agency ``may''--but need not--
take certain action are ``written in the language of permission and
discretion.'' See id. (citing S. Ry. Co. v. Seaboard Allied Milling,
442 U.S. 444, 455 (1979); see also Crooker v. SEC, 161 F.2d 944, 949
(1st Cir. 1947) (per curiam)). The Exchange believes that the
``contrast'' between Sections 19(b)(2) and 19(b)(3), the Commission
itself has explained, ``reflects the fundamental difference in the
way Congress intended for different types of rules to be treated''
and (``[W]hile the Commission's authority to suspend a fee under
Subsection (3)(C) is permissive, its duties under Subsection (2) are
stated in mandatory terms. See Notice, 89 FR at 24072 (citing Brief
of Respondent SEC, NetCoalition v. SEC, 715 F.3d 342-43 (D.C. Cir.
2013) (Nos. 10-1421 et al.).''). Thus, the Exchange argues that
neither Susquehanna, nor Section 19(b)(3) of the Act, requires the
Commission to make independent findings that an immediately
effective SRO fee filing such as this one is consistent with the Act
and, the Exchange argues that to the degree that the Susquehanna
decision is applicable to any Commission action, however, the court
held that the Commission is required to ``itself find or determine''
that a proposal meets statutory requirements, explaining that the
Commission is ``obligated to make an independent review'' of an
SRO's proposal, and not rely solely on the work of the SRO. See
Notice, 89 FR at 24072 (citing 866 F.3d at 446).
---------------------------------------------------------------------------
2. The Exchange Believes That Nothing in the Act Requires an
Examination of Fees in Isolation
The Exchange states that the Act mandates the ``equitable
allocation of reasonable dues, fees, and other charges among members
and issuers and other persons using its facilities,'' \50\ further
stating that this provision refers generally to ``reasonable dues,
fees, and other charges'' as a whole, not individual fees, and that
nothing in the Act requires the individual examination of specific
product fees in isolation.\51\ The Exchange states that evidence of
platform competition is sufficient to show that the product operates in
a competitive environment, provided that a proposed rule change does
not in and of itself undermine competition.\52\ The Exchange finally
states that a determination of whether a proposal permits unfair
discrimination between customers, issuers, brokers, or dealers remains
a separate product-specific inquiry.\53\
---------------------------------------------------------------------------
\50\ See 15 U.S.C. 78f(b)(4).
\51\ See Notice, 89 FR at 24072.
\52\ See id.
\53\ See id.
---------------------------------------------------------------------------
3. The Exchange Believes That the Commission Has Recognized That
Exchanges Are Subject to Significant Competitive Forces in the Market
for Order Flow
The Exchange states that the fact that the market for order flow is
competitive has long been recognized by the courts--citing
specifically, the
[[Page 46246]]
NetCoalition v. Securities and Exchange Commission statement, ``[n]o
one disputes that competition for order flow is `fierce.' . . . As the
SEC explained, `[i]n the U.S. national market system, buyers and
sellers of securities, and the broker-dealers that act as their order-
routing agents, have a wide range of choices of where to route orders
for execution'; [and] `no exchange can afford to take its market share
percentages for granted' because `no exchange possesses a monopoly,
regulatory or otherwise, in the execution of order flow from broker
dealers.' '' \54\
---------------------------------------------------------------------------
\54\ See NetCoalition, 615 F.3d at 539 (D.C. Cir. 2010) (quoting
Securities Exchange Act Release No. 59039 (December 2, 2008), 73 FR
74770, 74782-83 (December 9, 2008) (SR-NYSEArca-2006-21)). See also
Notice, 89 FR at 24072.
---------------------------------------------------------------------------
4. The Exchange Believes That All Exchange Products Are Subject to
Competition--Not Just Those Directly Related to Order Flow
The Exchange states that competition is not limited to order flow
and that data shows that the combination of explicit all-in costs to
trade and other implicit costs has largely equalized the cost to trade
across venues.\55\ The Exchange states that this is a function of the
fact that, if the all-in cost to the user of interacting with an
exchange exceeds market price, customers can and do shift their
purchases and trading activity to other exchanges, and therefore the
exchange must adjust one or more of its fees to attract customers.\56\
---------------------------------------------------------------------------
\55\ The Exchange states that competition across platforms
constrains platform fees and results in ``all-in'' costs becoming
equal across platforms, but that the Staff Guidance on SRO Rule
Filings Relating to Fees states that platform competition requires
that the ``overall return of the platform, rather than the return of
any particular fees charged to a type of customer, . . . be used to
assess the competitiveness of the platform's market,'' and that
``[a]n SRO that wishes to rely on total platform theory must provide
evidence demonstrating that competitive forces are sufficient to
constrain the SRO's aggregate return across the platform.'' See
Notice, 89 FR at 24072 (citing Fee Guidance Exchange's emphasis).
The Exchange states that it does not know, and cannot determine,
whether returns (as opposed to fees) are equalized across platforms,
because we do not have detailed cost information from other
exchanges. See id. The Exchange believes that an analysis of
returns, however, is unnecessary to show that competition constrains
fees given that, platform competition can be demonstrated solely by
examining costs to users. See id.
\56\ See Notice, 89 FR at 24072.
---------------------------------------------------------------------------
The Exchange states that this conclusion is particularly striking
given that different exchanges engage in a variety of business models
and offer an array of pricing options to appeal to different customer
types; specifically, that the largest exchanges operate maker-taker
platforms, offering rebates to attract trading liquidity, which allows
them to maintain actionable quotes with high liquidity and offer high-
quality market data.\57\ The Exchange further states that the negative
price charged to liquidity providers through rebates is part of the
platform because it serves to create features attractive to other
participants, including oftentimes tight spreads, actionable and lit
quotes, and more valuable market data.\58\
---------------------------------------------------------------------------
\57\ See id.
\58\ See id.
---------------------------------------------------------------------------
The Exchange states that inverted venues, in contrast, have the
opposite price structure--liquidity providers pay to add liquidity,
while liquidity takers earn a rebate--these platforms offer less
liquidity, but better queue priority, faster fills, and lower effective
spreads for investors.\59\ The Exchange states that there are a wide
range of other pricing models and product offerings among the dozens of
lit and unlit trading venues that compete in the marketplace in
addition to these examples.\60\ The Exchange further states that
different strategies among exchanges also manifest in the pricing of
other services, such as market data and connectivity.\61\ The Exchange
states that some exchanges charge for such services, while others
charge little or nothing (typically because the exchange is new or has
little liquidity), just as some exchanges charge a fee per trade, while
others pay rebates.\62\
---------------------------------------------------------------------------
\59\ See id.
\60\ See id.
\61\ See id.
\62\ See id.
---------------------------------------------------------------------------
In assessing competition for exchange services, the Exchange
explains that ``we must consider not only explicit costs, such as fees
for trading, market data, and connectivity, but also the implicit costs
of trading on an exchange[ ]''; and that ``[t]he realized spread, or
markout, captures the implicit cost to trade on a platform.'' \63\ The
Exchange further states that considering both the explicit costs
charged by exchanges for their various joint products and the implicit
costs incurred by traders to trade on various exchanges, the data show
that all-in trading costs across exchanges are largely equalized,
regardless of different trading strategies offered by each platform for
each individual service.\64\
---------------------------------------------------------------------------
\63\ The Exchange states that the concept of markout was created
by market makers trying to capture the spread while providing a two-
sided (bid and offer) market. See Notice, 89 FR at 24072. The
Exchange states that, for market makers, being filled on the bid or
the offer can cause a loss if the fill changes market prices. See
id. (stating as an example, a fill on a market maker's bid just as
the stock price falls results in a ``virtual loss,'' because the
market maker has a long position with a new bid lower than the
fill). The Exchange states that negative markouts can be beneficial.
See Notice, 89 FR at 24072 (stating as an example, if an
institutional investor is working a large buy order, negative
markouts represent fills as the market falls, allowing later orders
to be placed sooner, and likely at a better price, reducing the
opportunity costs as well as explicit cost of building the
position). The Exchange further states that data suggests that
market participants employ sophisticated analytic tools to weigh the
cost of immediate liquidity and lower opportunity costs against
better spread capture (lower markouts) and explicit trading costs.
See Notice, 89 FR at 24073. The Exchange states that, as discussed
in greater detail in its Exhibit 3, the venues with the highest
explicit costs--typically inverted and fee-fee venues--have the
lowest implicit costs from markouts and vice versa. See id. The
Exchange also states that higher positive markouts mean more spread
capture, but those venues also tend to have the highest explicit
costs, and provide the least liquidity, and positive externalities,
to the market. See id.
\64\ See Notice, 89 FR at 24073.
---------------------------------------------------------------------------
The Exchange states that platform competition has resulted in a
competitive environment in the market for exchange services, in which
trading platforms are constrained by other platforms' offerings, taking
into consideration the all-in cost of interacting with the
platform.\65\ The Exchange further states that this constraint is a
natural consequence of competition and demonstrates that no exchange
platform can charge excessive fees and expect to remain competitive,
thereby constraining fees on all products sold as part of the
platform.\66\ The Exchange finally states that the existence of
platform-level competition also explains why some consumers route
orders to the exchange with the highest explicit trading costs even
though other exchanges offer free or a net rebate for trading.\67\
---------------------------------------------------------------------------
\65\ See id.
\66\ See id.
\67\ The Exchange states that empirical evidence also shows that
market data is more valuable from exchanges with more liquidity.
According to the Exchange, many customers decide not to take data
from smaller markets, even though they are free or much lower cost
than larger markets. See Notice, 89 FR at 24073.
---------------------------------------------------------------------------
5. The Exchange Believes That Exchanges Compete at Both the Platform
and Product Level
The Exchange states that its customers are differentiated in the
value they place on the different products offered by exchanges and in
their willingness to pay for those products.\68\ The Exchange believes
that this occurs both on a firm-wide and a transaction basis; for
example, individual customers ``multi-home'' on various platforms, and
are thus able to route different trades to different platforms to take
advantage of favorable economics offered on a trade-to-trade basis.\69\
---------------------------------------------------------------------------
\68\ See Notice, 89 FR at 24073.
\69\ See id.
---------------------------------------------------------------------------
[[Page 46247]]
The Exchange believes that exchanges compete by offering
differentiated packages of pricing and products to attract different
categories of customer, and that, as in any competitive market,
consumers will ``vote with their feet,'' incentivizing platforms to
supply an array of pricing and product offerings that suit diverse
consumer needs far more effectively than a uniform, one-size-fits-some
rigid product offering.\70\ The Exchange further states that if an
exchange's pricing for a particular product gets out of line, such that
its total return is boosted above competitive levels, market forces
will discipline that approach because competing exchanges will quickly
attract customer volume through more attractive all-in trading
costs.\71\ In addition, the Exchange states that if a particular
package of pricing and products is not attractive to a sufficient
volume of customers in a particular category, those customers may elect
not to purchase the service and that this is why exchanges compete at a
product level, as well as based on all-in trading costs.\72\
---------------------------------------------------------------------------
\70\ See id.
\71\ See id.
\72\ See id.
---------------------------------------------------------------------------
6. The Exchange Believes That Exchanges Compete With Off-Exchange
Trading Platforms in Addition to Other Exchanges
The Exchange states that, as the SEC recently noted in its market
infrastructure proposal,\73\ the number of transactions completed on
non-exchange venues has been growing, and allowing exchanges to compete
as platforms will help exchanges compete against non-exchange venues,
and, to the degree order flow is shifted from non-exchange to exchange
venues, overall market transparency will improve.\74\ The Exchange
states that exchanges have a unique role to play in market transparency
because they publish an array of pre- and post-trade data that non-
exchange venues, almost entirely, do not. The Exchange further states
that greater transparency benefits non-exchange venues by enabling them
to provide more accurate pricing to their customers, and by helping
such venues set their own prices, benchmark, analyze the total cost of
ownership, and assess their own trading strategies.
---------------------------------------------------------------------------
\73\ See id. (citing Regulation NMS: Minimum Pricing Increments,
Access Fees, and Transparency of Better Price Orders, Securities
Exchange Act Release No. 96494 (File No. S7-30-22)).
\74\ See Notice, 89 FR at 24073 (stating that non-exchange
venues rely on market data distributed by exchanges to set prices
and greater transparency allows both exchange and non-exchange
venues to operate more effectively and efficiently).
---------------------------------------------------------------------------
The Exchange states that allowing exchanges to compete effectively
as platforms has other positive network effects: larger trading
platforms offer lower average trading costs; and as trading platforms
attract more liquidity, bid-ask spreads tighten, search costs fall (by
limiting the number of venues that a customer needs to check to assess
the market), and connection costs decrease, as customers have no need
to connect to all venues.\75\ The Exchanges argues that the whole is
therefore greater (in the sense that it is more efficient) than the sum
of the parts.\76\
---------------------------------------------------------------------------
\75\ In addition, the Exchange states that its experience shows
that fewer customers connect with smaller trading venues than with
larger venues. See Notice, 89 FR at 24073.
\76\ See Notice, 89 FR at 24073.
---------------------------------------------------------------------------
The Exchange states that this is not to say that smaller
established trading platforms do not have a role to play as they
provide specialized services that cater to individual customer needs,
but that these specialized services help the smaller exchanges grow by
driving liquidity to their platforms, and, if they are successful,
achieve the economies of scale that benefit the larger enterprises.\77\
The Exchange states that, because the total costs of interacting with
an exchange are roughly equal, smaller exchanges offset higher trading
costs with lower connectivity, market data, or other fees.\78\ The
Exchange states that, while the mix of fees will change as exchanges
grow, the all-in cost of interacting with the exchange remains roughly
the same.\79\ The Exchange finally states that acknowledging that
exchanges compete as platforms and approving fees expeditiously on that
basis will improve the ability of exchanges to compete against non-
exchange venues, and, to the degree order flow is shifted to exchanges,
both transparency and efficiency will improve.\80\
---------------------------------------------------------------------------
\77\ See id.
\78\ See id.
\79\ See id.
\80\ See id.
---------------------------------------------------------------------------
7. The Exchange States That the Proposed Fees Are Equitable and
Reasonable Because They Will Be Subject to Competition
The Exchange states that intent of the Proposal offering member
firms an incentive to display liquidity through lower non-display and
connectivity fees is to generate a ``virtuous cycle,'' in which the
proposed fee structure will attract more liquidity to the Exchange,
making it a more attractive trading venue, and thereby attracting more
liquidity.\81\ The Exchange states that incentive programs have been
widely adopted by exchanges, and are reasonable, equitable, and non-
discriminatory because they are open on an equal basis to similarly
situated members and provide additional benefits or discounts that are
reasonably related to the value to an exchange's market quality and
activity.\82\ The Exchange also states that the Proposal will
contribute to market quality because it will help bring new order flow
to the Exchange and greater displayed liquidity on the Exchange offers
investors deeper, more liquid markets and execution opportunities.\83\
The Exchange states that increased order flow benefits investors by
deepening the Exchange's liquidity pool, potentially providing greater
execution incentives and opportunities, offering additional flexibility
for all investors to enjoy cost savings, supporting the quality of
price discovery, promoting market transparency, and lowering spreads
between bids and offers and thereby lowering investor costs.\84\ The
Exchange states that, to the degree that liquidity is attracted from
dark venues, that liquidity also increases transparency for the market
overall, providing investors with more information about market
trends.\85\ The Exchange finally states that the Proposal will help
members that meet the Minimum ADV threshold maintain lower costs and
will benefit them through the many positive externalities associated
with a more liquid exchange.\86\
---------------------------------------------------------------------------
\81\ See id.
\82\ See id. (citing as examples Securities Exchange Act Release
No. 92493 (July 26, 2021), 86 FR 41129 (July 30, 2021) (SR-CboeEDGX-
2021-034) (proposal to provide discount to new members that meet
certain volume thresholds, noting that ``relative volume-based
incentives and discounts have been widely adopted by exchanges . . .
and are reasonable, equitable and non-discriminatory because they
are open on an equal basis to similarly situated members and provide
additional benefits or discounts that are reasonably related to (i)
the value to an exchange's market quality and (ii) associated higher
levels of market activity . . . .'') and Securities Exchange Act
Release No. 53790 (May 11, 2006), 71 FR 28738 (May 17, 2006) (SR-
Phlx-2006-04) (``The Commission recognizes that volume-based
discounts of fees are not uncommon, and where the discount can be
applied objectively, it is consistent with Rule 603. For the same
reasons noted above, the Commission believes that the fee structure
meets the standard in section 6(b)(4) of the Act in that the
proposed rule change provides for the equitable allocation of
reasonable dues, fees, and other charges among the Exchange's
members and issuers and other persons using its facilities.'')).
\83\ See Notice, 89 FR at 24074.
\84\ See id.
\85\ See id.
\86\ See id.
---------------------------------------------------------------------------
The Exchange states that the competition among exchanges as trading
[[Page 46248]]
platforms, as well as the competition between exchanges and alternative
trading venues, constrain exchanges from charging excessive fees for
any exchange products, including trading, listings, ports, and market
data.\87\ The Exchange also states that the fees that arise from the
competition among trading platforms may be too low because they fail to
reflect the benefits to the market as a whole of exchange products and
services, allowing other venues to free-ride on these investments by
the exchange platforms, increasing fragmentation and search costs.\88\
The Exchange believes that, as long as total returns are constrained by
competitive forces there is no regulatory basis to be concerned with
pricing of particular elements offered on a platform and that
regulatory constraints in this environment are likely to reduce
consumer welfare by constraining certain exchanges from offering
packages of pricing and products that would be attractive to certain
sets of consumers, thus impeding competition with venues that are not
subject to the same regulatory limitations and reducing the benefits of
competition to customers.\89\
---------------------------------------------------------------------------
\87\ See id.
\88\ See id.
\89\ See id.
---------------------------------------------------------------------------
8. The Exchange Believes That the Proposal Is Not Unfairly
Discriminatory
The Exchange states that the Proposal is not unfairly
discriminatory and that Non-Display Usage and the Exchange's 40Gb and
10Gb Ultra high-speed connections will be offered to all members and
non-members on like terms.\90\ The Exchanges states that it is also not
unfair to charge more to firms that do not directly contribute order
flow to the Exchange, but nevertheless benefit from that order flow
through tighter spreads, better prices, and the other advantages of a
more liquid platform.\91\ The Exchange also states that, specifically,
the Proposal is not unfairly discriminatory with respect to either
members or non-members.\92\ The Exchange states that, with respect to
members, all members that meet the ADV threshold will be charged lower
fees; and with respect to smaller members, Nasdaq offers rebates to
members that offer displayed liquidity.\93\ The Exchange states that,
with these rebates, any member--even smaller members--should have the
ability to post sufficient displayed liquidity to meet the ADV
threshold.\94\
---------------------------------------------------------------------------
\90\ See Notice, 89 FR at 24074.
\91\ See id.
\92\ See id.
\93\ See id.
\94\ See id.
---------------------------------------------------------------------------
The Exchange states that the Proposal is not unfairly
discriminatory with respect to non-member broker-dealers, which include
brokers routing trades through members and off-exchange trading
platforms that use exchange data to execute trades, because they have
the option of becoming members to obtain lower fees under the Proposal,
and because they realize the benefits of higher liquidity--including
tighter spreads and better prices--and it is not unfair discrimination
to charge a higher fee for that benefit.\95\ The Exchange further
states that the Proposal is not unfairly discriminatory with respect to
non-member firms that are not broker-dealers, such as market data
vendors and index providers, because they also benefit from the value
that the additional liquidity generated by this Proposal will provide
to the trading platform.\96\ The Exchange states that, incentivizing
higher levels of liquidity enhances and enriches the market data
distributed to the industry, and increases the overall value of
platform and that is not unfair for such parties to pay a higher fee to
reflect the greater value of the platform.\97\ The Exchange states that
discounts for specific categories of market participants are well-
established; examples include non-professional fees, broker-dealer
enterprise licenses, and a media enterprise license.\98\
---------------------------------------------------------------------------
\95\ See id.
\96\ See id.
\97\ See id.
\98\ See also id. (citing as an example The Nasdaq Stock Market,
Price List--U.S. Equities, available at https://www.nasdaqtrader.com/Trader.aspx?id=DPUSData (providing discounts for Non-Professional
subscribers for Nasdaq TotalView and other market data products,
enterprise licenses for broker-dealers for multiple market data
products, and a digital media enterprise license for Nasdaq Basic)).
---------------------------------------------------------------------------
B. Suspension
To date, the Commission has received one comment letter on the
proposed rule change, and the letter opposes the proposed rule
change.\99\ The commenter states, among other concerns, that the
Exchange mischaracterizes the Proposal as a discount instead of a fee
increase on some participants, and does not include sufficient or
meaningful data or justification to support the fee increase or the
tying of costs from one product (market data) to another product
(transactions).\100\ The commenter also states that the Proposal is
discriminatory, an undue burden on competition, and inconsistent with a
past Commission order disapproving a Nasdaq proposed rule change.\101\
---------------------------------------------------------------------------
\99\ See HMA Letter, supra n. 5.
\100\ See id. at 4-5.
\101\ See id. at 5-8 (citing Securities Exchange Act Release No.
65362 (September 20, 2011), 76 FR 59466 (September 26. 2011) (SR-
Nasdaq-2011-010) (Order Disapproving a Proposed Rule Change to Link
Market Data Fees and Transaction Execution Fees)).
---------------------------------------------------------------------------
When exchanges file their proposed rule changes with the
Commission, including fee filings like the Exchange's present Proposal,
they are required to provide a statement supporting the proposal's
basis under the Act and the rules and regulations thereunder applicable
to the exchange.\102\ The instructions to Form 19b-4, on which
exchanges file their proposed rule changes, specify that such statement
``should be sufficiently detailed and specific to support a finding
that the proposed rule change is consistent with [those]
requirements.'' \103\
---------------------------------------------------------------------------
\102\ See 17 CFR 240.19b-4 (Item 3 entitled ``Self-Regulatory
Organization's Statement of the Purpose of, and Statutory Basis for,
the Proposed Rule Change'').
\103\ See id.
---------------------------------------------------------------------------
Section 6 of the Act, including Sections 6(b)(4), (5), and (8),
require the rules of an exchange to: (1) provide for the equitable
allocation of reasonable fees among members, issuers, and other persons
using the exchange's facilities; \104\ (2) perfect the mechanism of a
free and open market and a national market system, protect investors
and the public interest, and not be designed to permit unfair
discrimination between customers, issuers, brokers, or dealers; \105\
and (3) not impose any burden on competition not necessary or
appropriate in furtherance of the purposes of the Act.\106\
---------------------------------------------------------------------------
\104\ 15 U.S.C. 78f(b)(4).
\105\ 15 U.S.C. 78f(b)(5).
\106\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
In temporarily suspending the Exchange's proposed rule change, the
Commission intends to further consider whether the Proposal to increase
market data and connectivity fees for participants who do not maintain
the minimum average daily displayed volume threshold is consistent with
the statutory requirements applicable to a national securities exchange
under the Act. In particular, the Commission will consider whether the
proposed rule change satisfies the standards under the Act and the
rules thereunder requiring, among other things, that an exchange's
rules provide for the equitable allocation of reasonable fees among
members, issuers, and other persons using its facilities; not permit
unfair discrimination between customers, issuers, brokers or dealers;
and do not impose any burden on competition not
[[Page 46249]]
necessary or appropriate in furtherance of the purposes of the
Act.\107\
---------------------------------------------------------------------------
\107\ See 15 U.S.C. 78f(b)(4), (5), and (8), respectively.
---------------------------------------------------------------------------
Therefore, the Commission finds that it is appropriate in the
public interest, for the protection of investors, and otherwise in
furtherance of the purposes of the Act, to temporarily suspend the
proposed rule change.\108\
---------------------------------------------------------------------------
\108\ For purposes of temporarily suspending the proposed rule
change, the Commission has considered the proposed rule's impact on
efficiency, competition, and capital formation. See 15 U.S.C.
78c(f).
---------------------------------------------------------------------------
IV. Proceedings To Determine Whether To Approve or Disapprove the
Proposed Rule Change
In addition to temporarily suspending the Proposal, the Commission
also hereby institutes proceedings pursuant to Sections 19(b)(3)(C)
\109\ and 19(b)(2)(B) of the Act \110\ to determine whether the
Exchange's proposed rule change should be approved or disapproved.
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 rule change to inform the
Commission's analysis of whether to approve or disapprove the proposed
rule change.
---------------------------------------------------------------------------
\109\ 15 U.S.C. 78s(b)(3)(C). Once the Commission temporarily
suspends a proposed rule change, Section 19(b)(3)(C) of the Act
requires that the Commission institute proceedings under Section
19(b)(2)(B) to determine whether a proposed rule change should be
approved or disapproved.
\110\ 15 U.S.C. 78s(b)(2)(B).
---------------------------------------------------------------------------
Pursuant to Section 19(b)(2)(B) of the Act,\111\ the Commission is
providing notice of the grounds for possible disapproval under
consideration:
---------------------------------------------------------------------------
\111\ Id. Section 19(b)(2)(B) of the Act also provides that
proceedings to determine whether to disapprove a proposed rule
change must be concluded within 180 days of the date of publication
of notice of the filing of the proposed rule change. See id. The
time for conclusion of the proceedings may be extended for up to 60
days if the Commission finds good cause for such extension and
publishes its reasons for so finding, or if the exchange consents to
the longer period. See id.
---------------------------------------------------------------------------
Whether the Exchange has demonstrated how the proposed
fees are consistent with Section 6(b)(4) of the Act, which requires
that the rules of a national securities exchange ``provide for the
equitable allocation of reasonable dues, fees, and other charges among
its members and issuers and other persons using its facilities''; \112\
---------------------------------------------------------------------------
\112\ 15 U.S.C. 78f(b)(4).
---------------------------------------------------------------------------
Whether the Exchange has demonstrated how the proposed
fees are consistent with Section 6(b)(5) of the Act, which requires,
among other things, that the rules of a national securities exchange
not be ``designed to permit unfair discrimination between customers,
issuers, brokers, or dealers''; \113\ and
---------------------------------------------------------------------------
\113\ 15 U.S.C. 78f(b)(5).
---------------------------------------------------------------------------
Whether the Exchange has demonstrated how the proposed
fees are consistent with Section 6(b)(8) of the Act, which requires
that the rules of a national securities exchange ``not impose any
burden on competition not necessary or appropriate in furtherance of
the purposes of [the Act].'' \114\
---------------------------------------------------------------------------
\114\ 15 U.S.C. 78f(b)(8).
---------------------------------------------------------------------------
As discussed in Section III above, the Exchange made various
arguments in support of the Proposal. There are questions as to whether
the Exchange has provided sufficient information to demonstrate that
the proposed fees are consistent with the Act and the rules thereunder.
The Commission will specifically consider, among other things, whether
the Exchange has provided sufficient information to demonstrate that
the Exchange is subject to significant competitive forces when setting
the proposed market data and connectivity fees in order to justify that
those fees are fair and reasonable. The Commission will also consider
whether the Exchange has provided sufficient information to demonstrate
that tying the proposed market data and connectivity fees to a minimum
average daily display volume threshold is not an undue burden on
competition or is not unfairly discriminatory.
Under the Commission's Rules of Practice, the ``burden to
demonstrate that a proposed rule change is consistent with the [Act]
and the rules and regulations issued thereunder . . . is on the [SRO]
that proposed the rule change.'' \115\ The description of a proposed
rule change, 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,\116\ and any failure of an SRO to provide this information may
result in the Commission not having a sufficient basis to make an
affirmative finding that a proposed rule change is consistent with the
Act and the applicable rules and regulations.\117\
---------------------------------------------------------------------------
\115\ 17 CFR 201.700(b)(3).
\116\ See id.
\117\ See id.
---------------------------------------------------------------------------
The Commission is instituting proceedings to allow for additional
consideration and comment on the issues raised herein, including as to
whether the proposed fees are consistent with the Act, and
specifically, with its requirements that exchange fees be reasonable
and equitably allocated, not be unfairly discriminatory, and not impose
any burden on competition that is not necessary or appropriate in
furtherance of the purposes of the Act.\118\
---------------------------------------------------------------------------
\118\ See 15 U.S.C. 78f(b)(4), (5), and (8).
---------------------------------------------------------------------------
V. Commission's Solicitation of Comments
The Commission requests written views, data, and arguments with
respect to the concerns identified above as well as any other relevant
concerns. Such comments should be submitted by June 18, 2024. Rebuttal
comments should be submitted by July 2, 2024. 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 19b-4, any request for
an opportunity to make an oral presentation.\119\
---------------------------------------------------------------------------
\119\ 15 U.S.C. 78s(b)(2). Section 19(b)(2) of the Act grants
the Commission flexibility to determine what type of proceeding--
either oral or notice and opportunity for written comments--is
appropriate for consideration of a particular proposal by an SRO.
See Securities Acts Amendments of 1975, Report of the Senate
Committee on Banking, Housing and Urban Affairs to Accompany S. 249,
S. Rep. No. 75, 94th Cong., 1st Sess. 30 (1975).
---------------------------------------------------------------------------
The Commission asks that commenters address the sufficiency and
merit of the Exchange's statements in support of the Proposal, in
addition to any other comments they may wish to submit about the
proposed rule change.
Interested persons are invited to submit written data, views and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-NASDAQ-2024-016 on the subject line.
Paper Comments
Send paper comments in triplicate to Secretary, Securities
and Exchange Commission, 100 F Street NE, Washington, DC 20549-1090.
All submissions should refer to file number SR-NASDAQ-2024-016. 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
[[Page 46250]]
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 a.m. and 3 p.m. Copies of the
filing also will be available for inspection and copying at the
principal office of the Exchange. Do not include personal identifiable
information in submissions; you should submit only information that you
wish to make available publicly. We may redact in part or withhold
entirely from publication submitted material that is obscene or subject
to copyright protection. All submissions should refer to file number
SR-NASDAQ-2024-016 and should be submitted on or before June 18, 2024.
Rebuttal comments should be submitted by July 2, 2024.
VI. Conclusion
It is therefore ordered, pursuant to Section 19(b)(3)(C) of the
Act,\120\ that File No. SR-NASDAQ-2024-016, be and hereby is,
temporarily suspended. In addition, the Commission is instituting
proceedings to determine whether the proposed rule change should be
approved or disapproved.
---------------------------------------------------------------------------
\120\ 15 U.S.C. 78s(b)(3)(C).
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\121\
---------------------------------------------------------------------------
\121\ 17 CFR 200.30-3(a)(57).
---------------------------------------------------------------------------
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-11581 Filed 5-24-24; 8:45 am]
BILLING CODE 8011-01-P
