Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.; Notice of Filing and Immediate Effectiveness of a Proposed Rule Change To Amend the Fee Schedule To Adopt Certain Market Data Fees, 90782-90787 [2024-26751]
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Federal Register / Vol. 89, No. 222 / Monday, November 18, 2024 / Notices
The proposal would not burden
competition in the sale of such circuits,
but rather, enhance it by providing
Users with an additional choice for their
circuit needs.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
No written comments were solicited
or received with respect to the proposed
rule change.
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
The Exchange has filed the proposed
rule change pursuant to Section
19(b)(3)(A)(iii) of the Act 20 and Rule
19b–4(f)(6) thereunder.21 Because the
proposed rule change does not: (i)
significantly affect the protection of
investors or the public interest; (ii)
impose any significant burden on
competition; and (iii) become operative
prior to 30 days from the date on which
it was filed, or such shorter time as the
Commission may designate, if
consistent with the protection of
investors and the public interest, the
proposed rule change has become
effective pursuant to Section 19(b)(3)(A)
of the Act and Rule 19b–4(f)(6)(iii)
thereunder.22
At any time within 60 days of the
filing of such proposed rule change, the
Commission summarily may
temporarily suspend such rule change if
it appears to the Commission that such
action is necessary or appropriate in the
public interest, for the protection of
investors, or otherwise in furtherance of
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
under Section 19(b)(2)(B) 23 of the Act to
determine whether the proposed rule
change should be approved or
disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
20 15
U.S.C. 78s(b)(3)(A)(iii).
CFR 240.19b–4(f)(6).
22 17 CFR 240.19b–4(f)(6). In addition, Rule 19b–
4(f)(6) requires the Exchange to give the
Commission written notice of its intent to file the
proposed rule change, along with a brief description
and text of the proposed rule change, at least five
business days prior to the date of filing of the
proposed rule change, or such shorter time as
designated by the Commission. The Exchange has
satisfied this requirement.
23 15 U.S.C. 78s(b)(2)(B).
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Comments may be submitted by any of
the following methods:
SECURITIES AND EXCHANGE
COMMISSION
Electronic Comments
[Release No. 34–101584; File No. SR–LTSE–
2024–08]
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
NYSEAMER–2024–64 on the subject
line.
Self-Regulatory Organizations; LongTerm Stock Exchange, Inc.; Notice of
Filing and Immediate Effectiveness of
a Proposed Rule Change To Amend
the Fee Schedule To Adopt Certain
Market Data Fees
Paper Comments
November 12, 2024.
• Send paper comments in triplicate
to Secretary, Securities and Exchange
Commission, 100 F Street NE,
Washington, DC 20549–1090.
All submissions should refer to file
number SR–NYSEAMER–2024–64. 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
subject to copyright protection. All
submissions should refer to file number
SR–NYSEAMER–2024–64 and should
be submitted on or before December 9,
2024.
Pursuant to Section 19(b)(1) of the
Securities Exchange Act of 1934
(‘‘Act’’),1 and Rule 19b–4 thereunder,2
notice is hereby given that on November
1, 2024, Long-Term Stock Exchange,
Inc. (‘‘LTSE’’ or Exchange’’) filed with
the Securities and Exchange
Commission (‘‘Commission’’) the
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the selfregulatory organization. The
Commission is publishing this notice to
solicit comments on the proposed rule
change from interested persons.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.24
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–26744 Filed 11–15–24; 8:45 am]
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing with the
Securities and Exchange Commission
(‘‘Commission’’) a proposed rule change
to amend the LTSE Fee Schedule (the
‘‘Fee Schedule’’) to adopt certain market
data fees effective November 1, 2024.
The Exchange notes that it submitted a
separate filing with the Commission
pursuant to Section 19(b)(3)(A) of the
Act to establish the Fee Schedule and
adopt transaction fees upon
commencement of its transition to a
new trading platform on September 23,
2024.
The text of the proposed rule change
is available at the Exchange’s website at
https://longtermstockexchange.com/, at
the principal office of the Exchange, and
at the Commission’s Public Reference
Room.
II. Self-Regulatory Organization’s
Statement on the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
In its filing with the Commission, the
Exchange included statements
concerning the purpose of and basis for
the proposed rule change and discussed
any comments it received on the
proposed rule change. The text of these
statements may be examined at the
places specified in Item IV below. The
self-regulatory organization has
BILLING CODE 8011–01–P
1 15
24 17
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CFR 200.30–3(a)(12).
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2 17
U.S.C. 78s(b)(1).
CFR 240.19b–4.
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Federal Register / Vol. 89, No. 222 / Monday, November 18, 2024 / Notices
prepared summaries, set forth in
Sections A, B, and C below, of the most
significant aspects of such statements.
A. Self-Regulatory Organization’s
Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule
Change
1. Purpose
The Exchange is proposing to
establish a new section (D. Market Data
Fees) in the Long-Term Stock Exchange
Fee Schedule and adopt fees for its
proprietary market data feeds, Depth of
Book, Top of Book and Last Sale
(collectively, the ‘‘Exchange Data
Feeds’’). The Exchange is proposing to
implement the proposed fees effective
November 1, 2024.
Proposed Market Data Pricing
The Exchange offers three separate
data feeds to subscribers—Depth of
Book, Top of Book and Last Sale. The
Exchange notes that there is no
requirement that any Firm subscribe to
a particular Exchange Data Feed or any
Exchange Data Feed whatsoever, but
instead, a Firm may choose to maintain
subscriptions to those Exchange Data
Feeds they deem appropriate based on
their business model. The proposed fee
will not apply differently based upon
the size or type of Firm, but rather based
upon the subscriptions a Firm has to
Exchange Data Feeds and their use
thereof, which are in turn based upon
factors deemed relevant by each Firm.
The proposed pricing for each of the
Exchange Data Feeds is set forth below.
Depth of Book
The Depth of Book feed is a LTSEonly market data feed that contains all
displayed orders for securities trading
on the Exchange (i.e., top and depth-ofbook order data), order executions (i.e.,
last sale data), order cancellations, order
modifications, order identification
numbers, and administrative messages.3
For the receipt of access to the Depth of
Book feed the Exchange proposes to
charge $2,500 per month. The proposed
fee would be charged to any data
recipient that receives the Depth of
Book feed for the purpose of either
internal distribution within the
Company and/or with Affiliates 4 or
3 See
LTSE Rule 11.330(a)(1).
distribution includes the sharing of any
Exchange data product to other legal entities
affiliated with the Firm that have been disclosed to
the Exchange. For instance, if a company has
multiple affiliated broker-dealers under the same
holding company, that company could have one of
the broker-dealers or a non broker-dealer affiliate
subscribe to an Exchange Data product and then
share the data with other affiliates that have a need
for the data. This sharing with affiliates would not
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external distribution to External
Parties.5 The proposed fee for Depth of
Book will be charged only once per
month per subscribing entity (‘‘Firm’’).
Top of Book
The Top of Book feed is a LTSE-only
market data feed that contains top of
book quotations based on equity orders
entered into the System as well as
administrative messages.6 For the
receipt of access to the Top of Book feed
the Exchange proposes to charge $500
per month. The proposed fee would be
charged to any data recipient that
receives the Top of Book feed for the
purpose of either internal distribution
within the Company and/or with
Affiliates or external distribution to
External Parties. The proposed fee for
Top of Book will be charged only once
per month per subscribing entity Firm.
Last Sale
The Last Sale feed is a LTSE-only
market data feed that contains only
execution information based on equity
orders entered into the System as well
as administrative messages.7 For the
receipt of access to the Last Sale feed
the Exchange proposes to charge $0 per
month.
In proposing to charge fees for
Exchange Data Feeds, the Exchange has
sought to be especially diligent in
assessing those fees in a transparent way
against its own aggregate costs of
providing the related services, and also
carefully and transparently assessing the
impact on Members—both generally and
in relation to other Members, i.e., to
assure the fee will not create a financial
burden on any participant and will not
have an undue impact in particular on
smaller Members and competition
among Members in general. The
Exchange believes that this level
diligence and transparency is called for
by the requirements of Section 19(b)(1)
under the Act,8 and Rule 19b–4
thereunder,9 with respect to the types of
information self-regulatory
organizations (‘‘SROs’’) should provide
when filing fee changes, and Section
6(b) of the Act,10 which requires, among
other things, that exchange fees be
be considered external distribution to a third party
but instead would be considered internal
distribution to data recipients within the
Distributor’s own organization.
5 External distribution would be defined to mean
a Firm that receives an Exchange data product and
then distributes that data to a third party or one or
more data recipients outside the Firm’s
organization.
6 See LTSE Rule 11.330(a)(2).
7 See LTSE Rule 11.330(a)(3).
8 15 U.S.C. 78s(b)(1).
9 17 CFR 240.19b–4.
10 15 U.S.C. 78f(b).
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reasonable and equitably allocated,11
not designed to permit unfair
discrimination,12 and that they not
impose a burden on competition not
necessary or appropriate in furtherance
of the purposes of the Act.13 This rule
change proposal addresses those
requirements, and the analysis and data
in each of the sections that follow are
designed to clearly and
comprehensively show how they are
met.14
Cost Analysis
The Exchange notes it operates a
unique model where the LTSE trading
system and services are provided on an
outsourced basis by MEMX
Technologies LLC.15 As such, most of
the Exchange’s technology costs,
including those related to Exchange
Data Feeds are incorporated into the
overall fees that the Exchange pays
MEMX Technologies as part of its multiyear arrangement to provide a trading
system and associated services. Because
of this arrangement, the Exchange does
not possess the same level of specificity
for cost drivers related to Exchange Data
Feeds as other exchanges have detailed
within their own similar filings.
However, the Exchange recognizes that
the costs associated with building out
and maintaining a state-of-the-art
network infrastructure for LTSE were
extensive and in line with the costs that
MEMX LLC, an exchange that also uses
the trading system and associated
services of MEMX Technologies,
outlined in its own filing establishing
market data fees for Members and NonMembers.16 These include costs
associated with maintaining and
expanding a team of highly-skilled
engineers, fees charged by the thirdparty data center operator, and costs
11 15
U.S.C. 78f(b)(4).
U.S.C. 78(b)(5) [sic].
13 15 U.S.C. 78f(b)(8).
14 In 2019, Commission staff published guidance
suggesting the types of information that SROs may
use to demonstrate that their fee filings comply
with the standards of the Exchange Act (‘‘Fee
Guidance’’). While LTSE understands that the Fee
Guidance does not create new legal obligations on
SROs, the Fee Guidance is consistent with LTSE’s
view about the type and level of transparency that
exchanges should meet to demonstrate compliance
with their existing obligations when they seek to
charge new fees. See Staff Guidance on SRO Rule
Filings Relating to Fees (May 21, 2019).
15 The Exchange and MEMX Technologies
executed a Development, License and Services
Agreement on January 23, 2024, with accompanying
Schedules (collectively, the ‘‘DLSA’’). MEMX
Technologies, an affiliate of the MEMX Exchange,
is in the business of developing technology systems
for use in the financial industry. See SR–LTSE–
2024–03.
16 See Securities Exchange Act Release No. 34–
97130 (March 13, 2023), 88 FR 16491 (March 17,
2013) (SR–MEMX–2023–04).
12 15
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associated with fully-supporting
advances in infrastructure and
expansion of network level services,
including customer monitoring, alerting
and reporting. There are also significant
technology expenses related to
establishing and maintaining
Information Security services, enhanced
network monitoring and customer
reporting, as well as Regulation SCI
mandated processes, associated with the
MEMX Technologies network
technology. Because of this structure,
the Exchange is unable to separate out
the costs for servicing and providing
Exchange Market Data, as these are
intricately combined in its DSLA with
MEMX Technologies.
Further, while the Exchange has been
operating since September 2020, it only
entered the DLSA with MEMX
Technologies LLC in January of this year
and launched the new trading system in
September 2024. Therefore, the
Exchange’s most recent publicly
available financial statement (2023
Audited Unconsolidated Financial
Statement) is not an accurate reflection
of the total annual costs associated with
the development and operation of
Market Data on LTSE. Accordingly, the
Exchange believes it is more appropriate
to justify its fees using cost figures that
are isolated specifically for LTSE on an
annualized basis, and utilizing a recent
monthly billing cycle and extrapolated
annualized costs on a going-forward
basis.
LTSE recently calculated its aggregate
monthly costs for providing Market Data
at $212,963 beginning October 1, 2024.
Before the launch of the new trading
system in September 2024 the Exchange
did not offer any market data products.
Now, in order to cover some of the
aggregate costs of providing Market Data
to market participants (both Members
and non-Members) the Exchange is
proposing to modify its Fee Schedule
and charge the Market Data fees detailed
above.
In order to determine the Exchange’s
costs for providing the services
associated with the Market Data Fees,
the Exchange conducted an extensive
review in which the Exchange analyzed
every expense item in the Exchange’s
general expense ledger to determine
whether each such expense relates to
the services associated with the Market
Data Fees, and, if such expense did so
relate, what portion (or percentage) of
such expense actually supports those
services. The sum of all such portions
of expenses represents the total cost of
the Exchange to provide the services
associated with the Market Data Fees.
For the avoidance of doubt, no expense
amount was allocated twice. The
Exchange is also providing detailed
information regarding the Exchange’s
cost allocation methodology—namely,
information that explains the
Exchange’s rationale for determining
that it was reasonable to allocate certain
expenses described in this filing
towards the total cost to provide
Exchange Data Feeds.
The Exchange believes that the
Market Data Fees are fair and reasonable
because they will not result in excessive
pricing or supra-competitive profit,
when comparing the total annual
expense that the Exchange projects to
incur in connection with providing the
services associated with the proposed
Market Data Fees versus the total annual
revenue of the Exchange projects to
collect in connection with providing
those services.
Costs Related to Offering Market Data
The following chart details the
individual line-item costs considered by
LTSE to be related to offering market
data as well as the percentage of the
Exchange’s overall costs per year such
costs represent for such area (e.g., as set
forth below, the Exchange allocated
approximately 10% of its overall
Human Resources cost to offering
market data).
Cost drivers
% of all
Third-Party Expenses ..................................................................................................................................
Human Resources .......................................................................................................................................
Data Center .................................................................................................................................................
$1,854,420
543,100
158,040
32
10
30
Total ......................................................................................................................................................
2,555,560
..............................
Below are additional details regarding
each of the line-item costs considered
by LTSE to be related to offering the
Exchange Data Feeds.
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Yearly costs
Third-Party Expenses
As discussed above, LTSE has
undertaken a unique model where it has
outsourced its technology to a thirdparty technology provider. As such the
costs associated with Exchange Data
Feeds for this provider include (1) the
network infrastructure costs that
includes cabling and switches required
to generate and disseminate the
Exchange Data Feeds. These costs also
include the servers used at the
Exchange’s primary and back-up data
centers specifically for the Exchange
Data Feeds; (2) costs the third-party
provider incurs to provide physical
connectivity in the data centers where it
maintains its equipment—such as
dedicated space, security services,
cooling and power, (3) hardware and
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software licenses used to operate and
monitor physical assets necessary to
offer the Exchange Data Feeds, and (4)
depreciation of physical assets and
software, which also includes assets
used for generating and disseminating
the Exchange Data Feeds.
Human Resources
For personnel costs (Human
Resources), LTSE calculated an
allocation of LTSE employee time for
employees whose functions include
providing services necessary to offer the
Exchange Data Feeds, including
performance thereof, as well as
personnel with ancillary functions
related to establishing and providing
such services (such as information
security and finance personnel). The
Exchange notes that it has fewer than
fifty (50) employees and each
department leader has direct knowledge
of the time spent by each employee with
respect to the various tasks necessary to
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operate the Exchange. The estimates of
Human Resources cost were therefore
determined by consulting with such
department leaders, determining which
employees are involved in tasks related
to providing the Exchange Data Feeds,
and confirming that the proposed
allocations were reasonable based on an
understanding of the percentage of their
time such employees devote to tasks
related to market data. The Exchange
notes that senior level executives were
only allocated Human Resources costs
to the extent the Exchange believed they
were involved in overseeing tasks
related to providing the Exchange Data
Feeds. The Human Resources cost was
calculated using a blended rate of
compensation reflecting salary, equity
and bonus compensation, benefits,
payroll taxes, and 401(k) matching
contributions.
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Data Center
Data Center costs include an
allocation of the costs the Exchange
incurs to monitor its trading platform
and the Exchange Data Feeds in thirdparty data centers where it maintains its
equipment as well as related costs (the
Exchange does not own the Primary
Data Center or the Secondary Data
Center, but instead, leases space in data
centers operated by third parties).
Proposed Fees—Additional Discussion
In conducting its Cost Analysis, the
Exchange did not allocate any of its
expenses in full to any core service and
did not double-count any expenses.
Instead, as described above, the
Exchange identified and allocated
applicable cost drivers across its core
services and used the same approach to
analyzing costs to form the basis of a
separate proposal to adopt fees for
connectivity services (the ‘‘Connectivity
Filing’’) 17 and this filing proposing fees
for Exchange Data Feeds. Thus, the
Exchange’s allocations of cost across
core services were based on real costs of
operating the Exchange and were not
double-counted across the core services
or their associated revenue streams.
The Exchange anticipates that the
proposed fees for Exchange Data Feeds
will generate approximately $50,000
monthly ($600,000 annually) based on
the subscriptions to Exchange Data
Feeds in the last six weeks, as well as
projections of new subscriptions as the
Exchange ramps up trading within its
new trading platform. The proposed fees
for Exchange Data Feeds are designed to
permit the Exchange to cover a portion
of costs for providing Exchange Data
Feeds, which the Exchange believes is
fair and reasonable after taking into
account the costs related to creating,
generating, and disseminating the
Exchange Data Feeds and the fact that
the Exchange will need to fund future
expenditures (increased costs,
improvements, etc.). LTSE notes that
like other exchanges, it is after all, a forprofit business. Accordingly, while the
Exchange believes in transparency
around costs and potential margins, as
well as periodic review of revenues and
applicable costs (as discussed below),
the Exchange does not believe that these
estimates should form the sole basis of
whether or not a proposed fee is
reasonable or can be adopted. Instead,
the Exchange believes that the
information should be used solely to
confirm that an Exchange is not earning
supra-competitive profits, and the
17 See Securities Exchange Act Release No. 34–
101320 (October 11, 2024), 89 FR 83731 (October
17, 2024) (SR–LTSE–2024–07).
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Exchange believes its Cost Analysis and
related projections demonstrate this
fact. As a general matter, the Exchange
believes that its costs will remain
relatively similar in future years. It is
possible however that such costs will
either decrease or increase. To the
extent the Exchange sees growth in use
of Exchange Data Feeds it will receive
additional revenue to offset future cost
increases. However, if use of Exchange
Data Feeds is static or decreases, the
Exchange might not realize the revenue
that it anticipates or needs in order to
cover applicable costs. Accordingly, the
Exchange is committing to conduct a
one-year review after implementation of
these fees. The Exchange expects that it
may propose to adjust fees at that time,
to increase fees in the event that
revenues fail to cover costs and a
reasonable mark-up of such costs.
Similarly, the Exchange expects that it
would propose to decrease fees in the
event that revenue materially exceeds
current projections. In addition, the
Exchange will periodically conduct a
review to inform its decision making on
whether a fee change is appropriate
(e.g., to monitor for costs increasing/
decreasing or subscribers increasing/
decreasing, etc. in ways that suggest the
then-current fees are becoming
dislocated from the prior cost-based
analysis) and expects that it would
propose to increase fees in the event
that revenues fail to cover its costs and
a reasonable mark-up, or decrease fees
in the event that revenue or the markup materially exceeds current
projections. In the event that the
Exchange determines to propose a fee
change, the results of a timely review,
including an updated cost estimate, will
be included in the rule filing proposing
the fee change. More generally, the
Exchange believes that it is appropriate
for an exchange to refresh and update
information about its relevant costs and
revenues in seeking any future changes
to fees, and the Exchange commits to do
so.
2. Statutory Basis
The Exchange believes that the
proposed rule change is consistent with
the provisions of Section 6(b) 18 of the
Act in general, and furthers the
objectives of Section 6(b)(4) 19 of the
Act, in particular, in that it is designed
to provide for the equitable allocation of
reasonable dues, fees and other charges
among its Members and other persons
using its facilities. Additionally, the
Exchange believes that the proposed
fees are consistent with the objectives of
18 15
19 15
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U.S.C. 78f(b)(4).
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Section 6(b)(5) 20 of the Act in that they
are designed to promote just and
equitable principles of trade, to foster
cooperation and coordination with
persons engaged in regulating, clearing,
settling, processing information with
respect to, and facilitating transactions
in securities, to remove impediments to
a free and open market and national
market system, and, in general, to
protect investors and the public interest,
and, particularly, are not designed to
permit unfair discrimination between
customers, issuers, brokers, or dealers.
The Exchange notes prior to
addressing the specific reasons the
Exchange believes the proposed fees
and fee structure are reasonable,
equitably allocated and not
unreasonably discriminatory, that the
proposed definitions and fee structure
described above are consistent with the
definitions and fee structure used by
most U.S. securities exchanges, and the
Investors Exchange LLC (‘‘IEX’’) 21 in
particular. As such, the Exchange
believes it is adopting a model that is
easily understood by Members and nonMembers, most of which also subscribe
to market data products from other
exchanges. For this reason, the
Exchange believes that the proposed
definitions and fee structure described
above are consistent with the Act
generally, and Section 6(b)(5) 22 of the
Act in particular.
Reasonableness
With regard to reasonableness, the
Exchange understands that the
Commission has traditionally taken a
market-based approach to examine
whether the SRO making the fee
proposal was subject to significant
competitive forces in setting the terms
of the proposal. The Exchange
understands that in general the analysis
considers whether the SRO has
demonstrated in its filing that (i) there
are reasonable substitutes for the
product or service; (ii) ‘‘platform’’
competition constrains the ability to set
the fee; and/or (iii) revenue and cost
analysis shows the fee would not result
in the SRO taking supracompetitive
profits. If the SRO demonstrates that the
fee is subject to significant competitive
forces, the Exchange understands that in
general the analysis will next consider
whether there is any substantial
countervailing basis to suggest the fee’s
terms fail to meet one or more standards
under the Exchange Act. The Exchange
20 15
U.S.C. 78f(b)(5).
charges $2,500 per month for its Depth of
Book Feed (DEEP Feed) and $500 per month for its
Top of Book Feed (TOPS Feed). All other market
data products on IEX are free.
22 15 U.S.C. 78f(b)(5).
21 IEX
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further understands that if the filing
fails to demonstrate that the fee is
constrained by competitive forces, the
SRO must provide a substantial basis,
other than competition, to show that it
is consistent with the Exchange Act,
which may include production of
relevant revenue and cost data
pertaining to the product or service.
The Exchange has not determined its
proposed overall market data fees based
on assumptions about market
competition, instead relying upon a
cost-plus model to determine a
reasonable fee structure that is informed
by the Exchange’s understanding of
different uses of the products by
different types of participants. In this
context, the Exchange believes the
proposed fees overall are fair and
reasonable as a form of cost recovery
plus the possibility of a reasonable
return for Exchange’s aggregate costs of
offering the Exchange Data Feeds. The
Exchange believes the proposed fees are
reasonable because they are designed to
generate annual revenue to recoup some
of Exchange’s annual costs of providing
market data. Accordingly, the Exchange
believes that this fee methodology is
reasonable because it allows the
Exchange to recoup some or all of its
expenses for providing market data
products. The Exchange also believes
that the proposed fees are reasonable
because they are generally less than the
fees charged by competing equities
exchanges for comparable market data
products, notwithstanding that the
competing exchanges may have
different system architectures that may
result in different cost structures for the
provision of market data.
The Exchange believes the proposed
fees for the Exchange Data Feeds are
reasonable when compared to fees for
comparable products, such as the
MEMX LLC (‘‘MEMX’’) 23 MEMOIR
Depth Feed,24 MEMOIR Top Feed 25 and
MEMOIR Last Sale Feed 26 compared to
which the Exchange’s proposed fees are
generally lower, as well as other
comparable data feeds priced
significantly higher than the Exchange’s
proposed fees for the Exchange Data
Feeds. Specifically with respect to the
Depth of Book feed, the Exchange
believes that the proposed fees for such
feed are reasonable because they
represent not only the value of the data
23 See the MEMX fee schedule, available at:
https://info.memxtrading.com/equities-tradingresources/us-equities-fee-schedule/.
24 MEMX charges between $1,500 and $5,000 for
its Depth of Book Feed.
25 MEMX charges between $750 and $10,000 for
its Top of Book Feed.
26 MEMX charges between $500 and $10,000 for
its Last Sale Feed.
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17:17 Nov 15, 2024
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available from the Top of Book and Last
Sale data feeds, which have lower
proposed fees, but also the value of
receiving the depth-of-book data on an
order-by order basis. The Exchange
believes it is reasonable to have pricing
based, in part, upon the amount of
information contained in each data feed
and the value of that information to
market participants. The Top of Book
and Last Sale data feeds, as described
above, can be utilized to trade on the
Exchange but contain less information
than that is available on the Depth of
Book feed (i.e., even for a subscriber
who takes both feeds, such feeds do not
contain depth-of-book information).
Thus, the Exchange believes it
reasonable for the products to be priced
as proposed, with Last Sale having the
lowest price, Top of Book the next
lowest price, and Depth of Book the
highest price (and more than Last Sale
and Top of Book combined).
Equitable Allocation
The Exchange believes that its
proposed fees are reasonable, fair, and
equitable, and not unfairly
discriminatory because they are
designed to align fees with services
provided. The Exchange believes the
proposed fees for the Exchange Data
Feeds are allocated fairly and equitably
among the various categories of users of
the feeds, and any differences among
categories of users are justified and
appropriate. The Exchange believes that
the proposed fees are equitably
allocated because they will apply
uniformly to all data recipients that
choose to subscribe to the Exchange
Data Feeds. Any subscriber or vendor
that chooses to subscribe to one or more
Exchange Data Feeds is subject to the
same Fee Schedule, regardless of what
type of business they operate, and the
decision to subscribe to one or more
Exchange Data Feeds is based on
objective differences in usage of
Exchange Data Feeds among different
Firms, which are still ultimately in the
control of any particular Firm. The
Exchange believes the proposed pricing
between Exchange Data Feeds is
equitably allocated because it is based,
in part, upon the amount of information
contained in each data feed and the
value of that information to market
participants. The Top of Book and Last
Sale data feeds, as described above, can
be utilized to trade on the Exchange but
contain less information than that is
available on the Depth of Book feed (i.e.,
even for a subscriber who takes both
feeds, such feeds do not contain depthof-book information). Thus, the
Exchange believes it is an equitable
allocation of fees for the products to be
PO 00000
Frm 00124
Fmt 4703
Sfmt 4703
priced as proposed, with Last Sale
having the lowest price, Top of Book the
next lowest price, and Depth of Book
the highest price (and more than Last
Sale and Top of Book combined).
The Proposed Fees Are Not Unfairly
Discriminatory
The Exchange believes that the
proposed fees are not unfairly
discriminatory because they would
apply to all data recipients that choose
to subscribe to the same Exchange Data
Feed(s). Any vendor or subscriber that
chooses to subscribe to the Exchange
Data Feeds is subject to the same Fee
Schedule, regardless of what type of
business they operate. Because the
proposed fees for Depth of Book are
higher, vendors and subscribers seeking
lower cost options may instead choose
to receive data from the SIPs or through
the Top of Book and/or Last Sale feed
for a lower cost. Alternatively, vendors
and subscribers can choose to pay for
the Depth of Book feed in order to
receive data in a single feed with depthof-book information if such information
is valuable to such vendors or
subscribers. The Exchange notes that
vendors or subscribers can also choose
to subscribe to a combination of data
feeds for redundancy purposes or to use
different feeds for different purposes. In
sum, each vendor or subscriber has the
ability to choose the best business
solution for itself. The Exchange does
not believe it is unfairly discriminatory
to base pricing upon the amount of
information contained in each data feed
and the value of that information to
market participants. As described above,
the Top of Book and Last Sale data
feeds, can be utilized to trade on the
Exchange but contain less information
than that is available on the Depth of
Book feed (i.e., even for a subscriber
who takes both feeds, such feeds do not
contain depth-of-book information).
Thus, the Exchange believes it is not
unfairly discriminatory for the products
to be priced as proposed, with Last Sale
having the lowest price, Top of Book the
next lowest price, and Depth of Book
the highest price (and more than Last
Sale and Top of Book combined).
B. Self-Regulatory Organization’s
Statement on Burden on Competition
In accordance with Section 6(b)(8) of
the Act,27 the Exchange does not believe
that the proposed rule change would
impose any burden on competition that
is not necessary or appropriate in
furtherance of the purposes of the Act.
27 15
E:\FR\FM\18NON1.SGM
U.S.C. 78f(b)(8).
18NON1
Federal Register / Vol. 89, No. 222 / Monday, November 18, 2024 / Notices
Intramarket Competition
The Exchange does not believe that
the proposed fees for Exchange Data
Feeds place certain market participants
at a relative disadvantage to other
market participants because, as noted
above, the proposed fees are associated
with usage of Exchange Data Feeds by
each market participant based on the
type of business they operate, and the
decision to subscribe to one or more
Exchange Data Feeds is based on
objective differences in usage of
Exchange Data Feeds among different
Firms, which are still ultimately in the
control of any particular Firm, and such
fees do not impose a barrier to entry to
smaller participants. Accordingly, the
proposed fees for Exchange Data Feeds
do not favor certain categories of market
participants in a manner that would
impose a burden on competition; rather,
the allocation of the proposed fees
reflects the types of Exchange Data
Feeds consumed by various market
participants and their usage thereof.
Intermarket Competition
The Exchange does not believe the
proposed fees place an undue burden on
competition on other SROs that is not
necessary or appropriate. In particular,
market participants are not forced to
subscribe to any of the Exchange Data
Feeds, as described above. Additionally,
other exchanges have similar market
data fees in place for their participants,
but with comparable and in many cases
higher rates for market data feeds. The
proposed fees are based on actual costs
and are designed to enable the Exchange
to recoup its applicable costs with the
possibility of a reasonable profit on its
investment as described in the Purpose
and Statutory Basis sections. Competing
equities exchanges are free to adopt
comparable fee structures subject to the
SEC rule filing process.
C. Self-Regulatory Organization’s
Statement on Comments on the
Proposed Rule Change Received From
Members, Participants, or Others
The Exchange neither solicited nor
received comments on the proposed
rule change.
lotter on DSK11XQN23PROD with NOTICES1
III. Date of Effectiveness of the
Proposed Rule Change and Timing for
Commission Action
This proposed rule change establishes
dues, fees or other charges among its
members and, as such, may take effect
upon filing with the Commission
pursuant to Section 19(b)(3)(A)(ii) of the
Act 28 and paragraph (f)(2) of Rule 19b–
4 thereunder.29 Accordingly, the
proposed rule change would take effect
upon filing with the Commission.
At any time within 60 days of the
filing of the proposed rule change, the
Commission summarily may
temporarily suspend the rule change if
it appears to the Commission that the
action is necessary or appropriate in the
public interest, for the protection of
investors, or would otherwise further
the purposes of the Act. If the
Commission takes such action, the
Commission shall institute proceedings
to determine whether the proposed rule
should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to
submit written data, views, and
arguments concerning the foregoing,
including whether the proposed rule
change is consistent with the Act.
Comments may be submitted by any of
the following methods:
Electronic Comments
• Use the Commission’s internet
comment form (https://www.sec.gov/
rules/sro.shtml); or
• Send an email to rule-comments@
sec.gov. Please include file number SR–
LTSE–2024–08 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–2024–08. 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
subject to copyright protection. All
submissions should refer to file number
SR–LTSE–2024–08 and should be
submitted on or before December 9,
2024.
For the Commission, by the Division of
Trading and Markets, pursuant to delegated
authority.30
Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024–26751 Filed 11–15–24; 8:45 am]
BILLING CODE 8011–01–P
SECURITIES AND EXCHANGE
COMMISSION
[Release No. 34–101589; File No. SR–
SAPPHIRE–2024–35]
Self-Regulatory Organizations; MIAX
Sapphire, LLC; Notice of Filing and
Immediate Effectiveness of a Proposed
Rule Change by MIAX Sapphire LLC To
Extend the Sunset Provision Relating
to the Options Regulatory Fee (ORF)
November 12, 2024.
Pursuant to the provisions of Section
19(b)(1) of the Securities Exchange Act
of 1934 (‘‘Act’’) 1 and Rule 19b–4
thereunder,2 notice is hereby given that
on October 31, 2024, MIAX Sapphire,
LLC (‘‘MIAX Sapphire’’ or ‘‘Exchange’’)
filed with the Securities and Exchange
Commission (‘‘Commission’’) a
proposed rule change as described in
Items I, II, and III below, which Items
have been prepared by the Exchange.
The Commission is publishing this
notice to solicit comments on the
proposed rule change from interested
persons.
I. Self-Regulatory Organization’s
Statement of the Terms of Substance of
the Proposed Rule Change
The Exchange is filing a proposal to
amend the MIAX Sapphire Options
Exchange Fee Schedule (the ‘‘Fee
Schedule’’) relating to the Options
Regulatory Fee (‘‘ORF’’) to extend the
current sunset date of October 31, 2024
to May 31, 2025.
The text of the proposed rule change
is available on the Exchange’s website at
https://www.miaxglobal.com/markets/
us-options/all-options-exchanges/rule30 17
CFR 200.30–3(a)(12).
U.S.C. 78s(b)(1).
2 17 CFR 240.19b–4.
1 15
28 15
U.S.C. 78s(b)(3)(A)(ii).
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CFR 240.19b–4(f)(2).
Frm 00125
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E:\FR\FM\18NON1.SGM
18NON1
]]>Agencies
[Federal Register Volume 89, Number 222 (Monday, November 18, 2024)]
[Notices]
[Pages 90782-90787]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: 2024-26751]
-----------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
[Release No. 34-101584; File No. SR-LTSE-2024-08]
Self-Regulatory Organizations; Long-Term Stock Exchange, Inc.;
Notice of Filing and Immediate Effectiveness of a Proposed Rule Change
To Amend the Fee Schedule To Adopt Certain Market Data Fees
November 12, 2024.
Pursuant to Section 19(b)(1) of the Securities Exchange Act of 1934
(``Act''),\1\ and Rule 19b-4 thereunder,\2\ notice is hereby given that
on November 1, 2024, Long-Term Stock Exchange, Inc. (``LTSE'' or
Exchange'') filed with the Securities and Exchange Commission
(``Commission'') the proposed rule change as described in Items I, II,
and III below, which Items have been prepared by the self-regulatory
organization. The Commission is publishing this notice to solicit
comments on the proposed rule change from interested persons.
---------------------------------------------------------------------------
\1\ 15 U.S.C. 78s(b)(1).
\2\ 17 CFR 240.19b-4.
---------------------------------------------------------------------------
I. Self-Regulatory Organization's Statement of the Terms of Substance
of the Proposed Rule Change
The Exchange is filing with the Securities and Exchange Commission
(``Commission'') a proposed rule change to amend the LTSE Fee Schedule
(the ``Fee Schedule'') to adopt certain market data fees effective
November 1, 2024. The Exchange notes that it submitted a separate
filing with the Commission pursuant to Section 19(b)(3)(A) of the Act
to establish the Fee Schedule and adopt transaction fees upon
commencement of its transition to a new trading platform on September
23, 2024.
The text of the proposed rule change is available at the Exchange's
website at https://longtermstockexchange.com/, at the principal office
of the Exchange, and at the Commission's Public Reference Room.
II. Self-Regulatory Organization's Statement on the Purpose of, and
Statutory Basis for, the Proposed Rule Change
In its filing with the Commission, the Exchange included statements
concerning the purpose of and basis for the proposed rule change and
discussed any comments it received on the proposed rule change. The
text of these statements may be examined at the places specified in
Item IV below. The self-regulatory organization has
[[Page 90783]]
prepared summaries, set forth in Sections A, B, and C below, of the
most significant aspects of such statements.
A. Self-Regulatory Organization's Statement of the Purpose of, and
Statutory Basis for, the Proposed Rule Change
1. Purpose
The Exchange is proposing to establish a new section (D. Market
Data Fees) in the Long-Term Stock Exchange Fee Schedule and adopt fees
for its proprietary market data feeds, Depth of Book, Top of Book and
Last Sale (collectively, the ``Exchange Data Feeds''). The Exchange is
proposing to implement the proposed fees effective November 1, 2024.
Proposed Market Data Pricing
The Exchange offers three separate data feeds to subscribers--Depth
of Book, Top of Book and Last Sale. The Exchange notes that there is no
requirement that any Firm subscribe to a particular Exchange Data Feed
or any Exchange Data Feed whatsoever, but instead, a Firm may choose to
maintain subscriptions to those Exchange Data Feeds they deem
appropriate based on their business model. The proposed fee will not
apply differently based upon the size or type of Firm, but rather based
upon the subscriptions a Firm has to Exchange Data Feeds and their use
thereof, which are in turn based upon factors deemed relevant by each
Firm. The proposed pricing for each of the Exchange Data Feeds is set
forth below.
Depth of Book
The Depth of Book feed is a LTSE-only market data feed that
contains all displayed orders for securities trading on the Exchange
(i.e., top and depth-of-book order data), order executions (i.e., last
sale data), order cancellations, order modifications, order
identification numbers, and administrative messages.\3\ For the receipt
of access to the Depth of Book feed the Exchange proposes to charge
$2,500 per month. The proposed fee would be charged to any data
recipient that receives the Depth of Book feed for the purpose of
either internal distribution within the Company and/or with Affiliates
\4\ or external distribution to External Parties.\5\ The proposed fee
for Depth of Book will be charged only once per month per subscribing
entity (``Firm'').
---------------------------------------------------------------------------
\3\ See LTSE Rule 11.330(a)(1).
\4\ Internal distribution includes the sharing of any Exchange
data product to other legal entities affiliated with the Firm that
have been disclosed to the Exchange. For instance, if a company has
multiple affiliated broker-dealers under the same holding company,
that company could have one of the broker-dealers or a non broker-
dealer affiliate subscribe to an Exchange Data product and then
share the data with other affiliates that have a need for the data.
This sharing with affiliates would not be considered external
distribution to a third party but instead would be considered
internal distribution to data recipients within the Distributor's
own organization.
\5\ External distribution would be defined to mean a Firm that
receives an Exchange data product and then distributes that data to
a third party or one or more data recipients outside the Firm's
organization.
---------------------------------------------------------------------------
Top of Book
The Top of Book feed is a LTSE-only market data feed that contains
top of book quotations based on equity orders entered into the System
as well as administrative messages.\6\ For the receipt of access to the
Top of Book feed the Exchange proposes to charge $500 per month. The
proposed fee would be charged to any data recipient that receives the
Top of Book feed for the purpose of either internal distribution within
the Company and/or with Affiliates or external distribution to External
Parties. The proposed fee for Top of Book will be charged only once per
month per subscribing entity Firm.
---------------------------------------------------------------------------
\6\ See LTSE Rule 11.330(a)(2).
---------------------------------------------------------------------------
Last Sale
The Last Sale feed is a LTSE-only market data feed that contains
only execution information based on equity orders entered into the
System as well as administrative messages.\7\ For the receipt of access
to the Last Sale feed the Exchange proposes to charge $0 per month.
---------------------------------------------------------------------------
\7\ See LTSE Rule 11.330(a)(3).
---------------------------------------------------------------------------
In proposing to charge fees for Exchange Data Feeds, the Exchange
has sought to be especially diligent in assessing those fees in a
transparent way against its own aggregate costs of providing the
related services, and also carefully and transparently assessing the
impact on Members--both generally and in relation to other Members,
i.e., to assure the fee will not create a financial burden on any
participant and will not have an undue impact in particular on smaller
Members and competition among Members in general. The Exchange believes
that this level diligence and transparency is called for by the
requirements of Section 19(b)(1) under the Act,\8\ and Rule 19b-4
thereunder,\9\ with respect to the types of information self-regulatory
organizations (``SROs'') should provide when filing fee changes, and
Section 6(b) of the Act,\10\ which requires, among other things, that
exchange fees be reasonable and equitably allocated,\11\ not designed
to permit unfair discrimination,\12\ and that they not impose a burden
on competition not necessary or appropriate in furtherance of the
purposes of the Act.\13\ This rule change proposal addresses those
requirements, and the analysis and data in each of the sections that
follow are designed to clearly and comprehensively show how they are
met.\14\
---------------------------------------------------------------------------
\8\ 15 U.S.C. 78s(b)(1).
\9\ 17 CFR 240.19b-4.
\10\ 15 U.S.C. 78f(b).
\11\ 15 U.S.C. 78f(b)(4).
\12\ 15 U.S.C. 78(b)(5) [sic].
\13\ 15 U.S.C. 78f(b)(8).
\14\ In 2019, Commission staff published guidance suggesting the
types of information that SROs may use to demonstrate that their fee
filings comply with the standards of the Exchange Act (``Fee
Guidance''). While LTSE understands that the Fee Guidance does not
create new legal obligations on SROs, the Fee Guidance is consistent
with LTSE's view about the type and level of transparency that
exchanges should meet to demonstrate compliance with their existing
obligations when they seek to charge new fees. See Staff Guidance on
SRO Rule Filings Relating to Fees (May 21, 2019).
---------------------------------------------------------------------------
Cost Analysis
The Exchange notes it operates a unique model where the LTSE
trading system and services are provided on an outsourced basis by MEMX
Technologies LLC.\15\ As such, most of the Exchange's technology costs,
including those related to Exchange Data Feeds are incorporated into
the overall fees that the Exchange pays MEMX Technologies as part of
its multi-year arrangement to provide a trading system and associated
services. Because of this arrangement, the Exchange does not possess
the same level of specificity for cost drivers related to Exchange Data
Feeds as other exchanges have detailed within their own similar
filings. However, the Exchange recognizes that the costs associated
with building out and maintaining a state-of-the-art network
infrastructure for LTSE were extensive and in line with the costs that
MEMX LLC, an exchange that also uses the trading system and associated
services of MEMX Technologies, outlined in its own filing establishing
market data fees for Members and Non-Members.\16\ These include costs
associated with maintaining and expanding a team of highly-skilled
engineers, fees charged by the third-party data center operator, and
costs
[[Page 90784]]
associated with fully-supporting advances in infrastructure and
expansion of network level services, including customer monitoring,
alerting and reporting. There are also significant technology expenses
related to establishing and maintaining Information Security services,
enhanced network monitoring and customer reporting, as well as
Regulation SCI mandated processes, associated with the MEMX
Technologies network technology. Because of this structure, the
Exchange is unable to separate out the costs for servicing and
providing Exchange Market Data, as these are intricately combined in
its DSLA with MEMX Technologies.
---------------------------------------------------------------------------
\15\ The Exchange and MEMX Technologies executed a Development,
License and Services Agreement on January 23, 2024, with
accompanying Schedules (collectively, the ``DLSA''). MEMX
Technologies, an affiliate of the MEMX Exchange, is in the business
of developing technology systems for use in the financial industry.
See SR-LTSE-2024-03.
\16\ See Securities Exchange Act Release No. 34-97130 (March 13,
2023), 88 FR 16491 (March 17, 2013) (SR-MEMX-2023-04).
---------------------------------------------------------------------------
Further, while the Exchange has been operating since September
2020, it only entered the DLSA with MEMX Technologies LLC in January of
this year and launched the new trading system in September 2024.
Therefore, the Exchange's most recent publicly available financial
statement (2023 Audited Unconsolidated Financial Statement) is not an
accurate reflection of the total annual costs associated with the
development and operation of Market Data on LTSE. Accordingly, the
Exchange believes it is more appropriate to justify its fees using cost
figures that are isolated specifically for LTSE on an annualized basis,
and utilizing a recent monthly billing cycle and extrapolated
annualized costs on a going-forward basis.
LTSE recently calculated its aggregate monthly costs for providing
Market Data at $212,963 beginning October 1, 2024. Before the launch of
the new trading system in September 2024 the Exchange did not offer any
market data products. Now, in order to cover some of the aggregate
costs of providing Market Data to market participants (both Members and
non-Members) the Exchange is proposing to modify its Fee Schedule and
charge the Market Data fees detailed above.
In order to determine the Exchange's costs for providing the
services associated with the Market Data Fees, the Exchange conducted
an extensive review in which the Exchange analyzed every expense item
in the Exchange's general expense ledger to determine whether each such
expense relates to the services associated with the Market Data Fees,
and, if such expense did so relate, what portion (or percentage) of
such expense actually supports those services. The sum of all such
portions of expenses represents the total cost of the Exchange to
provide the services associated with the Market Data Fees. For the
avoidance of doubt, no expense amount was allocated twice. The Exchange
is also providing detailed information regarding the Exchange's cost
allocation methodology--namely, information that explains the
Exchange's rationale for determining that it was reasonable to allocate
certain expenses described in this filing towards the total cost to
provide Exchange Data Feeds.
The Exchange believes that the Market Data Fees are fair and
reasonable because they will not result in excessive pricing or supra-
competitive profit, when comparing the total annual expense that the
Exchange projects to incur in connection with providing the services
associated with the proposed Market Data Fees versus the total annual
revenue of the Exchange projects to collect in connection with
providing those services.
Costs Related to Offering Market Data
The following chart details the individual line-item costs
considered by LTSE to be related to offering market data as well as the
percentage of the Exchange's overall costs per year such costs
represent for such area (e.g., as set forth below, the Exchange
allocated approximately 10% of its overall Human Resources cost to
offering market data).
------------------------------------------------------------------------
Cost drivers Yearly costs % of all
------------------------------------------------------------------------
Third-Party Expenses.............. $1,854,420 32
Human Resources................... 543,100 10
Data Center....................... 158,040 30
-------------------------------------
Total......................... 2,555,560 .................
------------------------------------------------------------------------
Below are additional details regarding each of the line-item costs
considered by LTSE to be related to offering the Exchange Data Feeds.
Third-Party Expenses
As discussed above, LTSE has undertaken a unique model where it has
outsourced its technology to a third-party technology provider. As such
the costs associated with Exchange Data Feeds for this provider include
(1) the network infrastructure costs that includes cabling and switches
required to generate and disseminate the Exchange Data Feeds. These
costs also include the servers used at the Exchange's primary and back-
up data centers specifically for the Exchange Data Feeds; (2) costs the
third-party provider incurs to provide physical connectivity in the
data centers where it maintains its equipment--such as dedicated space,
security services, cooling and power, (3) hardware and software
licenses used to operate and monitor physical assets necessary to offer
the Exchange Data Feeds, and (4) depreciation of physical assets and
software, which also includes assets used for generating and
disseminating the Exchange Data Feeds.
Human Resources
For personnel costs (Human Resources), LTSE calculated an
allocation of LTSE employee time for employees whose functions include
providing services necessary to offer the Exchange Data Feeds,
including performance thereof, as well as personnel with ancillary
functions related to establishing and providing such services (such as
information security and finance personnel). The Exchange notes that it
has fewer than fifty (50) employees and each department leader has
direct knowledge of the time spent by each employee with respect to the
various tasks necessary to operate the Exchange. The estimates of Human
Resources cost were therefore determined by consulting with such
department leaders, determining which employees are involved in tasks
related to providing the Exchange Data Feeds, and confirming that the
proposed allocations were reasonable based on an understanding of the
percentage of their time such employees devote to tasks related to
market data. The Exchange notes that senior level executives were only
allocated Human Resources costs to the extent the Exchange believed
they were involved in overseeing tasks related to providing the
Exchange Data Feeds. The Human Resources cost was calculated using a
blended rate of compensation reflecting salary, equity and bonus
compensation, benefits, payroll taxes, and 401(k) matching
contributions.
[[Page 90785]]
Data Center
Data Center costs include an allocation of the costs the Exchange
incurs to monitor its trading platform and the Exchange Data Feeds in
third-party data centers where it maintains its equipment as well as
related costs (the Exchange does not own the Primary Data Center or the
Secondary Data Center, but instead, leases space in data centers
operated by third parties).
Proposed Fees--Additional Discussion
In conducting its Cost Analysis, the Exchange did not allocate any
of its expenses in full to any core service and did not double-count
any expenses. Instead, as described above, the Exchange identified and
allocated applicable cost drivers across its core services and used the
same approach to analyzing costs to form the basis of a separate
proposal to adopt fees for connectivity services (the ``Connectivity
Filing'') \17\ and this filing proposing fees for Exchange Data Feeds.
Thus, the Exchange's allocations of cost across core services were
based on real costs of operating the Exchange and were not double-
counted across the core services or their associated revenue streams.
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\17\ See Securities Exchange Act Release No. 34-101320 (October
11, 2024), 89 FR 83731 (October 17, 2024) (SR-LTSE-2024-07).
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The Exchange anticipates that the proposed fees for Exchange Data
Feeds will generate approximately $50,000 monthly ($600,000 annually)
based on the subscriptions to Exchange Data Feeds in the last six
weeks, as well as projections of new subscriptions as the Exchange
ramps up trading within its new trading platform. The proposed fees for
Exchange Data Feeds are designed to permit the Exchange to cover a
portion of costs for providing Exchange Data Feeds, which the Exchange
believes is fair and reasonable after taking into account the costs
related to creating, generating, and disseminating the Exchange Data
Feeds and the fact that the Exchange will need to fund future
expenditures (increased costs, improvements, etc.). LTSE notes that
like other exchanges, it is after all, a for-profit business.
Accordingly, while the Exchange believes in transparency around costs
and potential margins, as well as periodic review of revenues and
applicable costs (as discussed below), the Exchange does not believe
that these estimates should form the sole basis of whether or not a
proposed fee is reasonable or can be adopted. Instead, the Exchange
believes that the information should be used solely to confirm that an
Exchange is not earning supra-competitive profits, and the Exchange
believes its Cost Analysis and related projections demonstrate this
fact. As a general matter, the Exchange believes that its costs will
remain relatively similar in future years. It is possible however that
such costs will either decrease or increase. To the extent the Exchange
sees growth in use of Exchange Data Feeds it will receive additional
revenue to offset future cost increases. However, if use of Exchange
Data Feeds is static or decreases, the Exchange might not realize the
revenue that it anticipates or needs in order to cover applicable
costs. Accordingly, the Exchange is committing to conduct a one-year
review after implementation of these fees. The Exchange expects that it
may propose to adjust fees at that time, to increase fees in the event
that revenues fail to cover costs and a reasonable mark-up of such
costs.
Similarly, the Exchange expects that it would propose to decrease
fees in the event that revenue materially exceeds current projections.
In addition, the Exchange will periodically conduct a review to inform
its decision making on whether a fee change is appropriate (e.g., to
monitor for costs increasing/decreasing or subscribers increasing/
decreasing, etc. in ways that suggest the then-current fees are
becoming dislocated from the prior cost-based analysis) and expects
that it would propose to increase fees in the event that revenues fail
to cover its costs and a reasonable mark-up, or decrease fees in the
event that revenue or the mark-up materially exceeds current
projections. In the event that the Exchange determines to propose a fee
change, the results of a timely review, including an updated cost
estimate, will be included in the rule filing proposing the fee change.
More generally, the Exchange believes that it is appropriate for an
exchange to refresh and update information about its relevant costs and
revenues in seeking any future changes to fees, and the Exchange
commits to do so.
2. Statutory Basis
The Exchange believes that the proposed rule change is consistent
with the provisions of Section 6(b) \18\ of the Act in general, and
furthers the objectives of Section 6(b)(4) \19\ of the Act, in
particular, in that it is designed to provide for the equitable
allocation of reasonable dues, fees and other charges among its Members
and other persons using its facilities. Additionally, the Exchange
believes that the proposed fees are consistent with the objectives of
Section 6(b)(5) \20\ of the Act in that they are designed to promote
just and equitable principles of trade, to foster cooperation and
coordination with persons engaged in regulating, clearing, settling,
processing information with respect to, and facilitating transactions
in securities, to remove impediments to a free and open market and
national market system, and, in general, to protect investors and the
public interest, and, particularly, are not designed to permit unfair
discrimination between customers, issuers, brokers, or dealers.
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\18\ 15 U.S.C. 78f.
\19\ 15 U.S.C. 78f(b)(4).
\20\ 15 U.S.C. 78f(b)(5).
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The Exchange notes prior to addressing the specific reasons the
Exchange believes the proposed fees and fee structure are reasonable,
equitably allocated and not unreasonably discriminatory, that the
proposed definitions and fee structure described above are consistent
with the definitions and fee structure used by most U.S. securities
exchanges, and the Investors Exchange LLC (``IEX'') \21\ in particular.
As such, the Exchange believes it is adopting a model that is easily
understood by Members and non-Members, most of which also subscribe to
market data products from other exchanges. For this reason, the
Exchange believes that the proposed definitions and fee structure
described above are consistent with the Act generally, and Section
6(b)(5) \22\ of the Act in particular.
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\21\ IEX charges $2,500 per month for its Depth of Book Feed
(DEEP Feed) and $500 per month for its Top of Book Feed (TOPS Feed).
All other market data products on IEX are free.
\22\ 15 U.S.C. 78f(b)(5).
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Reasonableness
With regard to reasonableness, the Exchange understands that the
Commission has traditionally taken a market-based approach to examine
whether the SRO making the fee proposal was subject to significant
competitive forces in setting the terms of the proposal. The Exchange
understands that in general the analysis considers whether the SRO has
demonstrated in its filing that (i) there are reasonable substitutes
for the product or service; (ii) ``platform'' competition constrains
the ability to set the fee; and/or (iii) revenue and cost analysis
shows the fee would not result in the SRO taking supracompetitive
profits. If the SRO demonstrates that the fee is subject to significant
competitive forces, the Exchange understands that in general the
analysis will next consider whether there is any substantial
countervailing basis to suggest the fee's terms fail to meet one or
more standards under the Exchange Act. The Exchange
[[Page 90786]]
further understands that if the filing fails to demonstrate that the
fee is constrained by competitive forces, the SRO must provide a
substantial basis, other than competition, to show that it is
consistent with the Exchange Act, which may include production of
relevant revenue and cost data pertaining to the product or service.
The Exchange has not determined its proposed overall market data
fees based on assumptions about market competition, instead relying
upon a cost-plus model to determine a reasonable fee structure that is
informed by the Exchange's understanding of different uses of the
products by different types of participants. In this context, the
Exchange believes the proposed fees overall are fair and reasonable as
a form of cost recovery plus the possibility of a reasonable return for
Exchange's aggregate costs of offering the Exchange Data Feeds. The
Exchange believes the proposed fees are reasonable because they are
designed to generate annual revenue to recoup some of Exchange's annual
costs of providing market data. Accordingly, the Exchange believes that
this fee methodology is reasonable because it allows the Exchange to
recoup some or all of its expenses for providing market data products.
The Exchange also believes that the proposed fees are reasonable
because they are generally less than the fees charged by competing
equities exchanges for comparable market data products, notwithstanding
that the competing exchanges may have different system architectures
that may result in different cost structures for the provision of
market data.
The Exchange believes the proposed fees for the Exchange Data Feeds
are reasonable when compared to fees for comparable products, such as
the MEMX LLC (``MEMX'') \23\ MEMOIR Depth Feed,\24\ MEMOIR Top Feed
\25\ and MEMOIR Last Sale Feed \26\ compared to which the Exchange's
proposed fees are generally lower, as well as other comparable data
feeds priced significantly higher than the Exchange's proposed fees for
the Exchange Data Feeds. Specifically with respect to the Depth of Book
feed, the Exchange believes that the proposed fees for such feed are
reasonable because they represent not only the value of the data
available from the Top of Book and Last Sale data feeds, which have
lower proposed fees, but also the value of receiving the depth-of-book
data on an order-by order basis. The Exchange believes it is reasonable
to have pricing based, in part, upon the amount of information
contained in each data feed and the value of that information to market
participants. The Top of Book and Last Sale data feeds, as described
above, can be utilized to trade on the Exchange but contain less
information than that is available on the Depth of Book feed (i.e.,
even for a subscriber who takes both feeds, such feeds do not contain
depth-of-book information). Thus, the Exchange believes it reasonable
for the products to be priced as proposed, with Last Sale having the
lowest price, Top of Book the next lowest price, and Depth of Book the
highest price (and more than Last Sale and Top of Book combined).
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\23\ See the MEMX fee schedule, available at: https://info.memxtrading.com/equities-trading-resources/us-equities-fee-schedule/.
\24\ MEMX charges between $1,500 and $5,000 for its Depth of
Book Feed.
\25\ MEMX charges between $750 and $10,000 for its Top of Book
Feed.
\26\ MEMX charges between $500 and $10,000 for its Last Sale
Feed.
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Equitable Allocation
The Exchange believes that its proposed fees are reasonable, fair,
and equitable, and not unfairly discriminatory because they are
designed to align fees with services provided. The Exchange believes
the proposed fees for the Exchange Data Feeds are allocated fairly and
equitably among the various categories of users of the feeds, and any
differences among categories of users are justified and appropriate.
The Exchange believes that the proposed fees are equitably allocated
because they will apply uniformly to all data recipients that choose to
subscribe to the Exchange Data Feeds. Any subscriber or vendor that
chooses to subscribe to one or more Exchange Data Feeds is subject to
the same Fee Schedule, regardless of what type of business they
operate, and the decision to subscribe to one or more Exchange Data
Feeds is based on objective differences in usage of Exchange Data Feeds
among different Firms, which are still ultimately in the control of any
particular Firm. The Exchange believes the proposed pricing between
Exchange Data Feeds is equitably allocated because it is based, in
part, upon the amount of information contained in each data feed and
the value of that information to market participants. The Top of Book
and Last Sale data feeds, as described above, can be utilized to trade
on the Exchange but contain less information than that is available on
the Depth of Book feed (i.e., even for a subscriber who takes both
feeds, such feeds do not contain depth-of-book information). Thus, the
Exchange believes it is an equitable allocation of fees for the
products to be priced as proposed, with Last Sale having the lowest
price, Top of Book the next lowest price, and Depth of Book the highest
price (and more than Last Sale and Top of Book combined).
The Proposed Fees Are Not Unfairly Discriminatory
The Exchange believes that the proposed fees are not unfairly
discriminatory because they would apply to all data recipients that
choose to subscribe to the same Exchange Data Feed(s). Any vendor or
subscriber that chooses to subscribe to the Exchange Data Feeds is
subject to the same Fee Schedule, regardless of what type of business
they operate. Because the proposed fees for Depth of Book are higher,
vendors and subscribers seeking lower cost options may instead choose
to receive data from the SIPs or through the Top of Book and/or Last
Sale feed for a lower cost. Alternatively, vendors and subscribers can
choose to pay for the Depth of Book feed in order to receive data in a
single feed with depth-of-book information if such information is
valuable to such vendors or subscribers. The Exchange notes that
vendors or subscribers can also choose to subscribe to a combination of
data feeds for redundancy purposes or to use different feeds for
different purposes. In sum, each vendor or subscriber has the ability
to choose the best business solution for itself. The Exchange does not
believe it is unfairly discriminatory to base pricing upon the amount
of information contained in each data feed and the value of that
information to market participants. As described above, the Top of Book
and Last Sale data feeds, can be utilized to trade on the Exchange but
contain less information than that is available on the Depth of Book
feed (i.e., even for a subscriber who takes both feeds, such feeds do
not contain depth-of-book information). Thus, the Exchange believes it
is not unfairly discriminatory for the products to be priced as
proposed, with Last Sale having the lowest price, Top of Book the next
lowest price, and Depth of Book the highest price (and more than Last
Sale and Top of Book combined).
B. Self-Regulatory Organization's Statement on Burden on Competition
In accordance with Section 6(b)(8) of the Act,\27\ the Exchange
does not believe that the proposed rule change would impose any burden
on competition that is not necessary or appropriate in furtherance of
the purposes of the Act.
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\27\ 15 U.S.C. 78f(b)(8).
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[[Page 90787]]
Intramarket Competition
The Exchange does not believe that the proposed fees for Exchange
Data Feeds place certain market participants at a relative disadvantage
to other market participants because, as noted above, the proposed fees
are associated with usage of Exchange Data Feeds by each market
participant based on the type of business they operate, and the
decision to subscribe to one or more Exchange Data Feeds is based on
objective differences in usage of Exchange Data Feeds among different
Firms, which are still ultimately in the control of any particular
Firm, and such fees do not impose a barrier to entry to smaller
participants. Accordingly, the proposed fees for Exchange Data Feeds do
not favor certain categories of market participants in a manner that
would impose a burden on competition; rather, the allocation of the
proposed fees reflects the types of Exchange Data Feeds consumed by
various market participants and their usage thereof.
Intermarket Competition
The Exchange does not believe the proposed fees place an undue
burden on competition on other SROs that is not necessary or
appropriate. In particular, market participants are not forced to
subscribe to any of the Exchange Data Feeds, as described above.
Additionally, other exchanges have similar market data fees in place
for their participants, but with comparable and in many cases higher
rates for market data feeds. The proposed fees are based on actual
costs and are designed to enable the Exchange to recoup its applicable
costs with the possibility of a reasonable profit on its investment as
described in the Purpose and Statutory Basis sections. Competing
equities exchanges are free to adopt comparable fee structures subject
to the SEC rule filing process.
C. Self-Regulatory Organization's Statement on Comments on the Proposed
Rule Change Received From Members, Participants, or Others
The Exchange neither solicited nor received comments on the
proposed rule change.
III. Date of Effectiveness of the Proposed Rule Change and Timing for
Commission Action
This proposed rule change establishes dues, fees or other charges
among its members and, as such, may take effect upon filing with the
Commission pursuant to Section 19(b)(3)(A)(ii) of the Act \28\ and
paragraph (f)(2) of Rule 19b-4 thereunder.\29\ Accordingly, the
proposed rule change would take effect upon filing with the Commission.
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\28\ 15 U.S.C. 78s(b)(3)(A)(ii).
\29\ 17 CFR 240.19b-4(f)(2).
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At any time within 60 days of the filing of the proposed rule
change, the Commission summarily may temporarily suspend the rule
change if it appears to the Commission that the action is necessary or
appropriate in the public interest, for the protection of investors, or
would otherwise further the purposes of the Act. If the Commission
takes such action, the Commission shall institute proceedings to
determine whether the proposed rule should be approved or disapproved.
IV. Solicitation of Comments
Interested persons are invited to submit written data, views, and
arguments concerning the foregoing, including whether the proposed rule
change is consistent with the Act. Comments may be submitted by any of
the following methods:
Electronic Comments
Use the Commission's internet comment form (https://www.sec.gov/rules/sro.shtml); or
Send an email to [email protected]. Please include
file number SR-LTSE-2024-08 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-2024-08. 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 subject to copyright protection. All
submissions should refer to file number SR-LTSE-2024-08 and should be
submitted on or before December 9, 2024.
For the Commission, by the Division of Trading and Markets,
pursuant to delegated authority.\30\
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\30\ 17 CFR 200.30-3(a)(12).
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Sherry R. Haywood,
Assistant Secretary.
[FR Doc. 2024-26751 Filed 11-15-24; 8:45 am]
BILLING CODE 8011-01-P
