2164 Federal Register / Vol. 76, No. 8 / Wednesday, January 12, 2011 / Notices 

5 15 U.S.C. 78s(b)(3)(A). 

6 17 CFR 240.19b–4(f)(2). 

7 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

plant, and to recover costs being 

charged to the Exchange for use of Floor 

Broker Order Capture Devices. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change is effective 

upon filing pursuant to Section 

19(b)(3)(A) 5 of the Act and 

subparagraph (f)(2) of Rule 19b–4 6

thereunder, because it establishes a due, 

fee, or other charge imposed by the 

NYSE Arca. 

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission summarily may 

temporarily suspend such rule change if 

it appears to the Commission that such 

action is necessary or appropriate in the 

public interest, for the protection of 

investors, or otherwise in furtherance of 

the purposes of the Act. 

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 (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NYSEArca–2010–123 on 

the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NYSEArca–2010–123. This 

file number should be included on the 

subject line if e-mail 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 Web site (http://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. All comments received will 

be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NYSEArca–2010–123 and should be 

submitted on or before February 2, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.7

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–432 Filed 1–11–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63641; File No. SR– 

NASDAQ–2010–172] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Extend Fee 

Pilot Program for NASDAQ Last Sale 

January 4, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’) 1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 

29, 2010, The NASDAQ Stock Market 

LLC (‘‘NASDAQ’’ or the ‘‘Exchange’’) 

filed with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the Exchange. 

The Commission is publishing this 

notice to solicit comments on the 

proposed rule change from interested 

persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

NASDAQ is proposing to extend for 

three months the fee pilot pursuant to 

which NASDAQ distributes the 

NASDAQ Last Sale (‘‘NLS’’) market data 

products. NLS allows data distributors 

to have access to real-time market data 

for a capped fee, enabling those 

distributors to provide free access to the 

data to millions of individual investors 

via the internet and television. 

Specifically, NASDAQ offers the 

‘‘NASDAQ Last Sale for NASDAQ’’ and 

‘‘NASDAQ Last Sale for NYSE/Amex’’ 

data feeds containing last sale activity in 

US equities within the NASDAQ Market 

Center and reported to the jointlyoperated FINRA/NASDAQ Trade 

Reporting Facility (‘‘FINRA/NASDAQ 

TRF’’), which is jointly operated by 

NASDAQ and the Financial Industry 

Regulatory Authority (‘‘FINRA’’). The 

purpose of this proposal is to extend the 

existing pilot program for three months, 

from January 1, 2011 through March 31, 

2011. 

This pilot program supports the 

aspiration of Regulation NMS to 

increase the availability of proprietary 

data by allowing market forces to 

determine the amount of proprietary 

market data information that is made 

available to the public and at what 

price. During the pilot period, the 

program has vastly increased the 

availability of NASDAQ proprietary 

market data to individual investors. 

Based upon data from NLS distributors, 

NASDAQ believes that since its launch 

in July 2008, the NLS data has been 

viewed by over 50,000,000 investors on 

Web sites operated by Google, 

Interactive Data, and Dow Jones, among 

others. 

The text of the proposed rule change 

is below. Proposed new language is 

italicized; proposed deletions are in 

brackets. 

* * * * * 

7039. NASDAQ Last Sale Data Feeds 

(a) For a three month pilot period 

commencing on [October] January 1, 

[2010] 2011, NASDAQ shall offer two 

proprietary data feeds containing realtime last sale information for trades 

executed on NASDAQ or reported to the 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 76, No. 8 / Wednesday, January 12, 2011 / Notices 2165 

3NASDAQ previously stated that it would file a 

proposed rule change to make the NLS pilot fees 

permanent. NASDAQ has also informed 

Commission staff that it is consulting with FINRA 

to develop a proposed rule change by FINRA to 

allow inclusion of FINRA/NASDAQ TRF data in 

NLS on a permanent basis. However, FINRA and 

NASDAQ have not completed their consultations 

regarding such a proposed rule change. 

Accordingly, NASDAQ is filing to seek a threemonth extension of the existing pilot. 

4 15 U.S.C. 78f. 

5 15 U.S.C. 78f(b)(4). 

6Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496 (June 29, 2005). 

NASDAQ/FINRA Trade Reporting 

Facility. 

(1)–(2) No change. 

(b)–(c) No change. 

* * * * * 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

NASDAQ included statements 

concerning the purpose of, and basis for, 

the proposed rule change. The text of 

these statements may be examined at 

the places specified in Item III below, 

and is set forth in Sections A, B, and C 

below. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Prior to the launch of NLS, public 

investors that wished to view market 

data to monitor their portfolios 

generally had two choices: (1) Pay for 

real-time market data or (2) use free data 

that is 15 to 20 minutes delayed. To 

increase consumer choice, NASDAQ 

proposed a pilot to offer access to realtime market data to data distributors for 

a capped fee, enabling those distributors 

to disseminate the data at no cost to 

millions of internet users and television 

viewers. NASDAQ now proposes a 

three-month extension of that pilot 

program, subject to the same fee 

structure as is applicable today.3

NLS consists of two separate ‘‘Level 1’’ 

products containing last sale activity 

within the NASDAQ market and 

reported to the jointly-operated FINRA/ 

NASDAQ TRF. First, the ‘‘NASDAQ Last 

Sale for NASDAQ’’ data product is a 

real-time data feed that provides realtime last sale information including 

execution price, volume, and time for 

executions occurring within the 

NASDAQ system as well as those 

reported to the FINRA/NASDAQ TRF. 

Second, the ‘‘NASDAQ Last Sale for 

NYSE/Amex’’ data product provides 

real-time last sale information including 

execution price, volume, and time for 

NYSE- and NYSE Amex-securities 

executions occurring within the 

NASDAQ system as well as those 

reported to the FINRA/NASDAQ TRF. 

NASDAQ established two different 

pricing models, one for clients that are 

able to maintain username/password 

entitlement systems and/or quote 

counting mechanisms to account for 

usage, and a second for those that are 

not. Firms with the ability to maintain 

username/password entitlement systems 

and/or quote counting mechanisms are 

eligible for a specified fee schedule for 

the NASDAQ Last Sale for NASDAQ 

Product and a separate fee schedule for 

the NASDAQ Last Sale for NYSE/Amex 

Product. Firms that are unable to 

maintain username/password 

entitlement systems and/or quote 

counting mechanisms also have 

multiple options for purchasing the 

NASDAQ Last Sale data. These firms 

choose between a ‘‘Unique Visitor’’ 

model for internet delivery or a 

‘‘Household’’ model for television 

delivery. Unique Visitor and Household 

populations must be reported monthly 

and must be validated by a third-party 

vendor or ratings agency approved by 

NASDAQ at NASDAQ’s sole discretion. 

In addition, to reflect the growing 

confluence between these media outlets, 

NASDAQ offered a reduction in fees 

when a single distributor distributes 

NASDAQ Last Sale Data Products via 

multiple distribution mechanisms. 

Second, NASDAQ established a cap 

on the monthly fee, currently set at 

$50,000 per month for all NASDAQ Last 

Sale products. The fee cap enables 

NASDAQ to compete effectively against 

other exchanges that also offer last sale 

data for purchase or at no charge. 

As with the distribution of other 

NASDAQ proprietary products, all 

distributors of the NASDAQ Last Sale 

for NASDAQ and/or NASDAQ Last Sale 

for NYSE/Amex products pay a single 

$1,500/month NASDAQ Last Sale 

Distributor Fee in addition to any 

applicable usage fees. The $1,500 

monthly fee applies to all distributors 

and does not vary based on whether the 

distributor distributes the data 

internally or externally or distributes 

the data via both the Internet and 

television. 

2. Statutory Basis 

NASDAQ believes that the proposed 

rule change is consistent with the 

provisions of Section 6 of the Act,4 in 

general, and with Section 6(b)(4) of the 

Act,5 in particular, in that it provides an 

equitable allocation of reasonable fees 

among users and recipients of the data. 

In adopting Regulation NMS, the 

Commission granted self-regulatory 

organizations and broker-dealers 

increased authority and flexibility to 

offer new and unique market data to the 

public. It was believed that this 

authority would expand the amount of 

data available to consumers, and also 

spur innovation and competition for the 

provision of market data. 

NASDAQ believes that its NASDAQ 

Last Sale market data products are 

precisely the sort of market data product 

that the Commission envisioned when it 

adopted Regulation NMS. The 

Commission concluded that Regulation 

NMS—by lessening regulation of the 

market in proprietary data—would itself 

further the Act’s goals of facilitating 

efficiency and competition: 

[E]fficiency is promoted when brokerdealers who do not need the data beyond the 

prices, sizes, market center identifications of 

the NBBO and consolidated last sale 

information are not required to receive (and 

pay for) such data. The Commission also 

believes that efficiency is promoted when 

broker-dealers may choose to receive (and 

pay for) additional market data based on their 

own internal analysis of the need for such 

data.6

By removing ‘‘unnecessary regulatory 

restrictions’’ on the ability of exchanges 

to sell their own data, Regulation NMS 

advanced the goals of the Act and the 

principles reflected in its legislative 

history. If the free market should 

determine whether proprietary data is 

sold to broker-dealers at all, it follows 

that the price at which such data is sold 

should be set by the market as well. 

The recent decision of the United 

States Court of Appeals for the District 

of Columbia Circuit in NetCoalition v. 

SEC, No. 09–1042 (DC Cir. 2010) upheld 

the Commission’s reliance upon 

competitive markets to set reasonable 

and equitably allocated fees for market 

data. ‘‘In fact, the legislative history 

indicates that the Congress intended 

that the market system ‘evolve through 

the interplay of competitive forces as 

unnecessary regulatory restrictions are 

removed’ and that the SEC wield its 

regulatory power ‘in those situations 

where competition may not be 

sufficient,’ such as in the creation of a 

‘consolidated transactional reporting 

system.’ ’’ NetCoalition, at 15 (quoting 

H.R.Rep. No. 94–229, at 92 (1975), as 

reprinted in 1975 U.S.C.C.A.N. 321, 

323). 

The court agreed with the 

Commission’s conclusion that ‘‘Congress 

intended that ‘competitive forces should 

dictate the services and practices that 

mstockstill on DSKH9S0YB1PROD with NOTICES

2166 Federal Register / Vol. 76, No. 8 / Wednesday, January 12, 2011 / Notices 

7NetCoalition v. SEC at p. 16. 

8 It should also be noted that Section 916 of DoddFrank Wall Street Reform and Consumer Protection 

Act of 2010 (‘‘Dodd-Frank Act’’) has amended 

paragraph (A) of Section 19(b)(3) of the Act, 15 

U.S.C. 78s(b)(3) to make it clear that all exchange 

fees, including fees for market data, may be filed by 

exchanges on an immediately effective basis. 

Although this change in the law does not alter the 

Commission’s authority to evaluate and ultimately 

disapprove exchange rules if it concludes that they 

are not consistent with the Act, it unambiguously 

reflects a conclusion that market data fee changes 

do not require prior Commission review before 

taking effect, and that a formal proceeding with 

regard to a particular fee change is required only if 

the Commission determines that it is necessary or 

appropriate to suspend the fee and institute such 

a proceeding. 

constitute the U.S. national market 

system for trading equity securities.’ ’’ 7

The Court in NetCoalition, while 

upholding the Commission’s conclusion 

that competitive forces may be relied 

upon to establish the fairness of prices, 

nevertheless concluded that the record 

in that case did not adequately support 

the Commission’s conclusions as to the 

competitive nature of the market for 

NYSEArca’s data product at issue in 

that case. As explained below in 

NASDAQ’s Statement on Burden on 

Competition, however, NASDAQ 

believes that there is substantial 

evidence of competition in the 

marketplace for data that was not in the 

record in the NetCoalition case, and that 

the Commission is entitled to rely upon 

such evidence in concluding that the 

fees established in this filing are the 

product of competition, and therefore in 

accordance with the relevant statutory 

standards.8

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

NASDAQ does not believe that the 

proposed rule change will result in any 

burden on competition that is not 

necessary or appropriate in furtherance 

of the purposes of the Act, as amended. 

NASDAQ’s ability to price its Last Sale 

Data Products is constrained by (1) 

competition between exchanges and 

other trading platforms that compete 

with each other in a variety of 

dimensions; (2) the existence of 

inexpensive real-time consolidated data 

and free delayed consolidated data; and 

(3) the inherent contestability of the 

market for proprietary last sale data. 

The market for proprietary last sale 

data products is currently competitive 

and inherently contestable because 

there is fierce competition for the inputs 

necessary to the creation of proprietary 

data and strict pricing discipline for the 

proprietary products themselves. 

Numerous exchanges compete with 

each other for listings, trades, and 

market data itself, providing virtually 

limitless opportunities for entrepreneurs 

who wish to produce and distribute 

their own market data. This proprietary 

data is produced by each individual 

exchange, as well as other entities, in a 

vigorously competitive market. 

Transaction execution and proprietary 

data products are complementary in that 

market data is both an input and a 

byproduct of the execution service. In 

fact, market data and trade execution are 

a paradigmatic example of joint 

products with joint costs. The decision 

whether and on which platform to post 

an order will depend on the attributes 

of the platform where the order can be 

posted, including the execution fees, 

data quality and price and distribution 

of its data products. Without trade 

executions, exchange data products 

cannot exist. Moreover, data products 

are valuable to many end users only 

insofar as they provide information that 

end users expect will assist them or 

their customers in making trading 

decisions. 

The costs of producing market data 

include not only the costs of the data 

distribution infrastructure, but also the 

costs of designing, maintaining, and 

operating the exchange’s transaction 

execution platform and the cost of 

regulating the exchange to ensure its fair 

operation and maintain investor 

confidence. The total return that a 

trading platform earns reflects the 

revenues it receives from both products 

and the joint costs it incurs. Moreover, 

an exchange’s broker-dealer customers 

view the costs of transaction executions 

and of data as a unified cost of doing 

business with the exchange. A brokerdealer will direct orders to a particular 

exchange only if the expected revenues 

from executing trades on the exchange 

exceed net transaction execution costs 

and the cost of data that the brokerdealer chooses to buy to support its 

trading decisions (or those of its 

customers). The choice of data products 

is, in turn, a product of the value of the 

products in making profitable trading 

decisions. If the cost of the product 

exceeds its expected value, the brokerdealer will choose not to buy it. 

Moreover, as a broker-dealer chooses to 

direct fewer orders to a particular 

exchange, the value of the product to 

that broker-dealer decreases, for two 

reasons. First, the product will contain 

less information, because executions of 

the broker-dealer’s orders will not be 

reflected in it. Second, and perhaps 

more important, the product will be less 

valuable to that broker-dealer because it 

does not provide information about the 

venue to which it is directing its orders. 

Data from the competing venue to 

which the broker-dealer is directing 

orders will become correspondingly 

more valuable. 

Similarly, in the case of products such 

as NLS that are distributed through 

market data vendors, the vendors 

provide price discipline for proprietary 

data products because they control the 

primary means of access to end users. 

Vendors impose price restraints based 

upon their business models. For 

example, vendors such as Bloomberg 

and Reuters that assess a surcharge on 

data they sell may refuse to offer 

proprietary products that end users will 

not purchase in sufficient numbers. 

Internet portals, such as Google, impose 

a discipline by providing only data that 

will enable them to attract ‘‘eyeballs’’ 

that contribute to their advertising 

revenue. Retail broker-dealers, such as 

Schwab and Fidelity, offer their 

customers proprietary data only if it 

promotes trading and generates 

sufficient commission revenue. 

Although the business models may 

differ, these vendors’ pricing discipline 

is the same: They can simply refuse to 

purchase any proprietary data product 

that fails to provide sufficient value. 

NASDAQ and other producers of 

proprietary data products must 

understand and respond to these 

varying business models and pricing 

disciplines in order to market 

proprietary data products successfully. 

Moreover, NASDAQ believes that 

products such as NLS can enhance 

order flow to NASDAQ by providing 

more widespread distribution of 

information about transactions in real 

time, thereby encouraging wider 

participation in the market by investors 

with access to the internet or television. 

Conversely, the value of such products 

to distributors and investors decreases if 

order flow falls, because the products 

contain less content. 

Analyzing the cost of market data 

distribution in isolation from the cost of 

all of the inputs supporting the creation 

of market data will inevitably 

underestimate the cost of the data. Thus, 

because it is impossible to create data 

without a fast, technologically robust, 

and well-regulated execution system, 

system costs and regulatory costs affect 

the price of market data. It would be 

equally misleading, however, to 

attribute all of the exchange’s costs to 

the market data portion of an exchange’s 

joint product. Rather, all of the 

exchange’s costs are incurred for the 

unified purposes of attracting order 

flow, executing and/or routing orders, 

and generating and selling data about 

market activity. The total return that an 

exchange earns reflects the revenues it 

receives from the joint products and the 

total costs of the joint products. 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 76, No. 8 / Wednesday, January 12, 2011 / Notices 2167 

Competition among trading platforms 

can be expected to constrain the 

aggregate return each platform earns 

from the sale of its joint products, but 

different platforms may choose from a 

range of possible, and equally 

reasonable, pricing strategies as the 

means of recovering total costs. For 

example, some platform may choose to 

pay rebates to attract orders, charge 

relatively low prices for market 

information (or provide information free 

of charge) and charge relatively high 

prices for accessing posted liquidity. 

Other platforms may choose a strategy 

of paying lower rebates (or no rebates) 

to attract orders, setting relatively high 

prices for market information, and 

setting relatively low prices for 

accessing posted liquidity. In this 

environment, there is no economic basis 

for regulating maximum prices for one 

of the joint products in an industry in 

which suppliers face competitive 

constraints with regard to the joint 

offering. This would be akin to strictly 

regulating the price that an automobile 

manufacturer can charge for car sound 

systems despite the existence of a highly 

competitive market for cars and the 

availability of after-market alternatives 

to the manufacturer-supplied system. 

The level of competition and 

contestability in the market is evident in 

the numerous alternative venues that 

compete for order flow, including ten 

self-regulatory organization (‘‘SRO’’) 

markets, as well as internalizing brokerdealers (‘‘BDs’’) and various forms of 

alternative trading systems (‘‘ATSs’’), 

including dark pools and electronic 

communication networks (‘‘ECNs’’). 

Each SRO market competes to produce 

transaction reports via trade executions, 

and two FINRA-regulated Trade 

Reporting Facilities (‘‘TRFs’’) compete to 

attract internalized transaction reports. 

It is common for BDs to further and 

exploit this competition by sending 

their order flow and transaction reports 

to multiple markets, rather than 

providing them all to a single market. 

Competitive markets for order flow, 

executions, and transaction reports 

provide pricing discipline for the inputs 

of proprietary data products. 

The large number of SROs, TRFs, BDs, 

and ATSs that currently produce 

proprietary data or are currently capable 

of producing it provides further pricing 

discipline for proprietary data products. 

Each SRO, TRF, ATS, and BD is 

currently permitted to produce 

proprietary data products, and many 

currently do or have announced plans to 

do so, including NASDAQ, NYSE, 

NYSE Amex, NYSEArca, and BATS. 

Any ATS or BD can combine with any 

other ATS, BD, or multiple ATSs or BDs 

to produce joint proprietary data 

products. Additionally, order routers 

and market data vendors can facilitate 

single or multiple BDs’ production of 

proprietary data products. The potential 

sources of proprietary products are 

virtually limitless. 

The fact that proprietary data from 

ATSs, BDs, and vendors can by-pass 

SROs is significant in two respects. 

First, non-SROs can compete directly 

with SROs for the production and sale 

of proprietary data products, as BATS 

and Arca did before registering as 

exchanges by publishing proprietary 

book data on the Internet. Second, 

because a single order or transaction 

report can appear in an SRO proprietary 

product, a non-SRO proprietary 

product, or both, the data available in 

proprietary products is exponentially 

greater than the actual number of orders 

and transaction reports that exist in the 

marketplace. 

In addition to the competition and 

price discipline described above, the 

market for proprietary data products is 

also highly contestable because market 

entry is rapid, inexpensive, and 

profitable. The history of electronic 

trading is replete with examples of 

entrants that swiftly grew into some of 

the largest electronic trading platforms 

and proprietary data producers: 

Archipelago, Bloomberg Tradebook, 

Island, RediBook, Attain, TracECN, 

BATS Trading and Direct Edge. Today, 

BATS publishes its data at no charge on 

its Web site in order to attract order 

flow, and it uses market data revenue 

rebates from the resulting executions to 

maintain low execution charges for its 

users. A proliferation of dark pools and 

other ATSs operate profitably with 

fragmentary shares of consolidated 

market volume. 

Regulation NMS, by deregulating the 

market for proprietary data, has 

increased the contestability of that 

market. While broker-dealers have 

previously published their proprietary 

data individually, Regulation NMS 

encourages market data vendors and 

broker-dealers to produce proprietary 

products cooperatively in a manner 

never before possible. Multiple market 

data vendors already have the capability 

to aggregate data and disseminate it on 

a profitable scale, including Bloomberg, 

Reuters and Thomson. 

The competitive nature of the market 

for products such as NLS is borne out 

by the performance of the market. In 

May 2008, the internet portal Yahoo! 

began offering its Web site viewers realtime last sale data provided by BATS 

Trading. NLS competes directly with 

the BATS product that is still 

disseminated via Yahoo! The New York 

Stock Exchange also distributes 

competing last sale data products at a 

price comparable to the price of NLS. 

Under the regime of Regulation NMS, 

there is no limit to the number of 

competing products that can be 

developed quickly and at low cost. 

Moreover, consolidated data provides 

two additional measures of pricing 

discipline for proprietary data products 

that are a subset of the consolidated data 

stream. First, the consolidated data is 

widely available in real-time at $1 per 

month for non-professional users. 

Second, consolidated data is also 

available at no cost with a 15- or 20- 

minute delay. Because consolidated 

data contains marketwide information, 

it effectively places a cap on the fees 

assessed for proprietary data (such as 

last sale data) that is simply a subset of 

the consolidated data. The mere 

availability of low-cost or free 

consolidated data provides a powerful 

form of pricing discipline for 

proprietary data products that contain 

data elements that are a subset of the 

consolidated data, by highlighting the 

optional nature of proprietary products. 

In this environment, a supercompetitive increase in the fees charged 

for either transactions or data has the 

potential to impair revenues from both 

products. ‘‘No one disputes that 

competition for order flow is ‘fierce’.’’ 

NetCoalition at 24. The existence of 

fierce competition for order flow 

implies a high degree of price sensitivity 

on the part of broker-dealers with order 

flow, since they may readily reduce 

costs by directing orders toward the 

lowest-cost trading venues. A brokerdealer that shifted its order flow from 

one platform to another in response to 

order execution price differentials 

would both reduce the value of that 

platform’s market data and reduce its 

own need to consume data from the 

disfavored platform. If a platform 

increases its market data fees, the 

change will affect the overall cost of 

doing business with the platform, and 

affected broker-dealers will assess 

whether they can lower their trading 

costs by directing orders elsewhere and 

thereby lessening the need for the more 

expensive data. Similarly, increases in 

the cost of NLS would impair the 

willingness of distributors to take a 

product for which there are numerous 

alternatives, impacting NLS data 

revenues, the value of NLS as a tool for 

attracting order flow, and ultimately, the 

volume of orders routed to NASDAQ 

and the value of its other data products. 

In establishing the price for the 

NASDAQ Last Sale Products, NASDAQ 

considered the competitiveness of the 

market for last sale data and all of the 

mstockstill on DSKH9S0YB1PROD with NOTICES

2168 Federal Register / Vol. 76, No. 8 / Wednesday, January 12, 2011 / Notices 

9 15 U.S.C. 78s(b)(3)(a)(ii). 10 17 CFR 200.30–3(a)(12). 

1 15 U.S.C. 78s(b)(1). 

2 17 CFR 240.19b–4. 

3A Member is any registered broker or dealer, or 

any person associated with a registered broker or 

dealer, that has been admitted to membership in the 

Exchange. 

implications of that competition. 

NASDAQ believes that it has considered 

all relevant factors and has not 

considered irrelevant factors in order to 

establish a fair, reasonable, and not 

unreasonably discriminatory fees and an 

equitable allocation of fees among all 

users. The existence of numerous 

alternatives to NLS, including real-time 

consolidated data, free delayed 

consolidated data, and proprietary data 

from other sources ensures that 

NASDAQ cannot set unreasonable fees, 

or fees that are unreasonably 

discriminatory, without losing business 

to these alternatives. Accordingly, 

NASDAQ believes that the acceptance 

of the NLS product in the marketplace 

demonstrates the consistency of these 

fees with applicable statutory standards. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

Three comment letters were filed 

regarding the proposed rule change as 

originally published for comment 

NASDAQ responded to these comments 

in a letter dated December 13, 2007. 

Both the comment letters and 

NASDAQ’s response are available on 

the SEC Web site at http://www.sec.gov/ 

comments/sr-nasdaq-2006–060/ 

nasdaq2006060.shtml. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The foregoing rule change has become 

effective pursuant to Section 

19(b)(3)(A)(ii) of the Act.9 At any time 

within 60 days of the filing of the 

proposed rule change, the Commission 

summarily may temporarily suspend 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule should be 

approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

Electronic Comments 

• Use the Commission’s Internet 

comment form (http://www.sec.gov/ 

rules/sro.shtml); or 

• Send an e-mail to rulecomments@sec.gov. Please include File 

Number SR–NASDAQ–2010–172 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NASDAQ–2010–172. This 

file number should be included on the 

subject line if e-mail 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 Web site (http://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 Web site viewing and 

printing in the Commission’s Public 

Reference Room, 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. All 

comments received will be posted 

without change; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–NASDAQ–2010–172 and 

should be submitted on or before 

February 2, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Elizabeth M. Murphy, 

Secretary. 

[FR Doc. 2011–431 Filed 1–11–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63638; File No. SR–EDGX– 

2010–25] 

Self-Regulatory Organizations; EDGX 

Exchange, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Relating to Amendments 

to the EDGX Exchange, Inc. Fee 

Schedule 

January 4, 2011. 

Pursuant to Section 19(b)(1) of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’),1 and Rule 19b–4 thereunder,2

notice is hereby given that on December 

28, 2010, the EDGX Exchange, Inc. (the 

‘‘Exchange’’ or the ‘‘EDGX’’) 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend its 

fees and rebates applicable to Members 3

of the Exchange pursuant to EDGX Rule 

15.1(a) and (c). 

All of the changes described herein 

are applicable to EDGX Members. The 

text of the proposed rule change is 

available on the Exchange’s Internet 

Web site at http://www.directedge.com. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of these statements may be examined at 

the places specified in Item IV below. 

The self-regulatory organization has 

prepared summaries, set forth in 

sections A, B and C below, of the most 

significant aspects of such statements. 

mstockstill on DSKH9S0YB1PROD with NOTICES