12388 Federal Register / Vol. 76, No. 44 / Monday, March 7, 2011 / Notices 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3A ‘‘Customer’’ is any entity that receives the BBO 

Data Feed directly from MDX’s system and then 

distributes it either internally or externally to 

Subscribers. A ‘‘Subscriber’’ is a person (other than 

an employee of a Customer) that receives the BBO 

Data Feed from a Customer for its own internal use. 

4The Exchange notes that MDX makes available 

to Customers the BBO data and last sale data that 

is included in the BBO Data Feed no earlier than 

the time at which the Exchange sends that data to 

OPRA. The Exchange also notes that it also makes 

the BBO data and last sale data that is included in 

the BBO Data Feed available directly to its Trading 

Permit Holders, and permits them to redistribute 

the data to their customers. 

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

6 15 U.S.C. 78f(b)(4). 

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 on official business 

days between the hours of 10 a.m. and 

3 p.m. Copies of such filing also will be 

available for inspection and copying at 

the principal offices 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–C2–2011–007, and should 

be submitted on or before March 28, 

2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–5060 Filed 3–4–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63997; File No. SR–CBOE– 

2011–014] 

Self-Regulatory Organizations; 

Chicago Board Options Exchange, 

Incorporated; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Codify a Fee Schedule 

for the Sale by Market Data Express, 

LLC, of a BBO Data Feed for CBOE 

Listed Options 

March 1, 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 February 

17, 2011, Chicago Board Options 

Exchange, Incorporated (‘‘CBOE’’ or the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I, II, and 

III below, which Items have been 

prepared by the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

This proposal submitted by Chicago 

Board Options Exchange, Incorporated 

(‘‘CBOE’’ or ‘‘Exchange’’) is to codify a fee 

schedule for the sale by Market Data 

Express, LLC (‘‘MDX’’), an affiliate of 

CBOE, of a data product that includes 

CBOE best bid and offer and trade data 

and certain related market data. The text 

of the proposed rule change is available 

on the Exchange’s Web site (http:// 

www.cboe.org/legal), at the Exchange’s 

Office of the Secretary and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

CBOE 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. CBOE has prepared 

summaries, set forth in sections (A), (B), 

and (C) below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The purpose of the proposed rule 

change is to establish fees that MDX will 

charge for the sale of certain market data 

with respect to the trading of options on 

CBOE’s market. 

CBOE currently collects and processes 

market data with respect to options 

quotes and orders and the prices of 

trades that are executed on the 

Exchange. This market data includes the 

‘‘best bid and offer,’’ or ‘‘BBO’’, 

consisting of all outstanding quotes and 

standing orders at the best available 

price level on each side of the market, 

with aggregate size (‘‘BBO data,’’ 

sometimes referred to as ‘‘top of book 

data’’). Data with respect to executed 

trades is referred to as ‘‘last sale’’ data. 

CBOE formats its BBO data and last sale 

data according to Options Price 

Reporting Authority (‘‘OPRA’’) 

specifications and sends the data to 

OPRA for redistribution to the public. 

MDX provides to ‘‘Customers’’ 3 a realtime, low latency data feed that includes 

the CBOE BBO data and last sale data. 

(This data feed is sometimes referred to 

in this filing as the ‘‘BBO Data Feed’’). 

The BBO and last sale data contained in 

the BBO Data Feed is identical to the 

data that CBOE sends to OPRA.4 In 

addition, the BBO Data Feed includes 

certain data that is not included in the 

data sent to OPRA, namely, totals of 

customer versus non-customer contracts 

at the BBO, All-or-None contingency 

orders priced better than or equal to the 

BBO, and BBO data and last sale data 

for complex strategies (e.g., spreads, 

straddles, buy-writes, etc.). The purpose 

of this proposed rule change is to 

establish the fees MDX will charge for 

the sale of the BBO Data Feed. 

MDX would charge Customers a 

‘‘direct connect fee’’ of $3,500 per 

connection per month. MDX would also 

charge Customers a ‘‘per user fee’’ of $25 

per month per ‘‘Authorized User’’ or 

‘‘Device’’ for receipt of the BBO Data 

Feed by Subscribers. An ‘‘Authorized 

User’’ is defined as an individual user 

(an individual human being) who is 

uniquely identified (by user ID and 

confidential password or other 

unambiguous method reasonably 

acceptable to MDX) and authorized by 

a Customer to access the BBO Data Feed 

supplied by the Customer. A ‘‘Device’’ is 

defined as any computer, workstation or 

other item of equipment, fixed or 

portable, that receives, accesses and/or 

displays data in visual, audible or other 

form. Either a CBOE Trading Permit 

Holder or a non-CBOE Trading Permit 

Holder may be a Customer. All 

Customers would be assessed the same 

fees. 

The proposed fees would be 

implemented on March 1, 2011. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the requirements of Section 6(b) of the 

Securities Exchange Act of 1934 

(‘‘Act’’) 5 in general, and, in particular, 

with Section 6(b)(4) of the Act 6 in that 

it provides for the equitable allocation 

of reasonable dues, fees and other 

charges among CBOE Trading Permit 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 76, No. 44 / Monday, March 7, 2011 / Notices 12389 

7 15 U.S.C. 78f(b)(5). 

8 15 U.S.C. 78f(b)(8). 

9See, NASDAQ OMX PHLX LLC Fee Schedule, 

Section X, Proprietary Data Feed Fees. 

10See, ISE Schedule of Fees, Market Data Fees. 

The Exchange believes that ISE does not market a 

separate data product that includes only its top of 

book prices, but top of book prices are an important 

element of the ISE Depth of Market Feed. 

11The Commission has previously made a finding 

that the options industry is subject to significant 

competitive forces. See e.g., Securities Exchange 

Act Release No. 59949 (May 20, 2009), 74 FR 25593 

(May 28, 2009) (SR–ISE–2009–97) (order approving 

ISE’s proposal to establish fees for a real-time depth 

of market data offering). 

12 15 U.S.C. 78s(b)(3)(A). 

13 17 CFR 240.19b-4(f)(2). [sic] 

Holders and other persons using its 

facilities, and with Section 6(b)(5) 7 of 

the Act in that there will be no unfair 

discrimination between customers, 

issuers, brokers, or dealers in the 

distribution of the data. In addition, the 

Exchange believes that the proposed 

rule change is consistent with the 

requirements of Section 6(b)(8) 8 of the 

Act in that it does not impose any 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. The fees charged 

would be the same for all market 

participants, and therefore do not 

unreasonably discriminate among 

market participants. 

The Exchange believes that the 

proposed market data fees are consistent 

with the requirements of the Act for 

several reasons. First, they compare 

favorably to fees that other markets 

charge for similar products. The 

proposed direct connect fee of $3,500 

per connection per month and per user 

fee of $25 per month compares 

favorably to the fees NASDAQ OMX 

PHLX and ISE charge for similar market 

data products. NASDAQ OMX PHLX 

charges Internal Distributors a monthly 

fee of $4,000 per organization, External 

Distributors a monthly fee of $5,000 per 

organization and monthly subscriber 

fees of $20 per Professional Subscriber 

and $1 per Non-Professional Subscriber 

for its ‘‘TOPO Plus Orders’’ data feed, 

which like the BBO Data Feed includes 

top-of-book data (including orders, 

quotes and trades) and other market 

data.9 ISE charges distributors of its ISE 

Depth of Market Feed a monthly fee of 

$5,000 plus $50 per month per 

controlled device for Professionals and 

$5 per month per controlled device for 

Non-Professionals.10

The Exchange also believes that the 

proposed fees for the BBO Data Feed are 

consistent with the requirements of the 

Act because competition provides an 

effective constraint on the market data 

fees that the Exchange, through MDX, 

has the ability and the incentive to 

charge. CBOE has a compelling need to 

attract order flow from market 

participants in order to maintain its 

share of trading volume. This 

compelling need to attract order flow 

imposes significant pressure on CBOE to 

act reasonably in setting its fees for 

market data, particularly given that the 

market participants that will pay such 

fees often will be the same market 

participants from whom CBOE must 

attract order flow. These market 

participants include broker-dealers that 

control the handling of a large volume 

of customer and proprietary order flow. 

Given the portability of order flow from 

one exchange to another, any exchange 

that sought to charge unreasonably high 

data fees would risk alienating many of 

the same customers on whose orders it 

depends for competitive survival. CBOE 

currently competes with eight options 

exchanges (including CBOE’s affiliate, 

C2 Options Exchange) for order flow.11

CBOE is constrained in pricing the 

BBO Data Feed by the availability to 

market participants of alternatives to 

purchasing the BBO Data Feed. CBOE 

must consider the extent to which 

market participants would choose one 

or more alternatives instead of 

purchasing the exchange’s data. For 

example, the BBO data and last sale data 

available in the BBO Data Feed are 

included in the OPRA data feed. The 

OPRA data is widely distributed and 

relatively inexpensive, thus 

constraining CBOE’s ability to price the 

BBO Data Feed. In this respect, the 

OPRA data feed, which includes the 

exchange’s transaction information, is a 

significant alternative to the BBO Data 

Feed product. 

Further, other options exchanges can 

and have produced their own top-ofbook products, and thus are sources of 

potential competition for MDX. As 

noted above, NASDAQ OMX PHLX and 

ISE offer market data products that 

compete with the BBO Data Feed. In 

addition, the Exchange believes other 

options exchanges may currently offer 

top-of-book market data products for a 

fee or for free. 

For the reasons cited above, the 

Exchange believes that the BBO Data 

Feed offering, including the proposed 

fees, is equitable, fair, reasonable and 

not unreasonably discriminatory. In 

addition, the Exchange believes that no 

substantial countervailing basis exists to 

support a finding that the proposed 

terms and fees for the BBO Data Feed 

fail to meet the requirements of the Act. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

CBOE does not believe that the 

proposed rule change will impose any 

burden on competition that is not 

necessary or appropriate in furtherance 

of purposes of the Act. The Exchange 

believes that the BBO Data Feed offered 

by MDX will help attract new users and 

new order flow to the Exchange, thereby 

improving the Exchange’s ability to 

compete in the market for options order 

flow and executions. 

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 has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 12 and subparagraph (f)(2) of 

Rule 19b–4 13 thereunder. 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–CBOE–2011–014 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–CBOE–2011–014. 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 


srobinson on DSKHWCL6B1PROD with NOTICES
12390 Federal Register / Vol. 76, No. 44 / Monday, March 7, 2011 / Notices 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 56145 

(July 26, 2007), 72 FR 42169 (August 1, 2007), as 

amended by Securities Exchange Act Release No. 

56145A (May 30, 2008), 73 FR 32377 (June 6, 2008) 

(Order Approving File No. SR–NASD–2007–023). 

4See Securities Exchange Act Release No. 37106 

(April 11, 1996), 61 FR 16944 (April 18, 1996) 

(Order Approving File No. SR–NASD–96–02). 

5See FINRA Regulation By-Laws, Article VIII, 

Section 8.1 (Establishment of Districts) and Section 

8.2 (Composition of District Committees). 

6See Securities Exchange Act Release No. 39326 

(November 14, 1997), 62 FR 62385 (November 21, 

1997) (Order Approving File No. SR–NASD–96–29). 

7See In the Matter of National Association of 

Securities Dealers, Inc., Securities Exchange Act 

Release No. 37538, 1996 SEC LEXIS 2146 (August 

8, 1996). 

8Supra note 7, at Undertaking 4. 

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 such filing also will be 

available for inspection and copying at 

the principal offices 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–CBOE–2011–014, and 

should be submitted on or before March 

28, 2011. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Cathy H. Ahn, 

Deputy Secretary. 

[FR Doc. 2011–5061 Filed 3–4–11; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–64002; File No. SR–FINRA– 

2011–011] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Proposed Rule Change To Amend the 

By-Laws of FINRA Regulation, Inc. 

With Regard to District Committee 

Structure and Governance 

March 2, 2011. 

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 February 

25, 2011, Financial Industry Regulatory 

Authority, Inc. (‘‘FINRA’’) (f/k/a 

National Association of Securities 

Dealers, Inc. (‘‘NASD’’)) filed with the 

Securities and Exchange Commission 

(‘‘SEC’’ or ‘‘Commission’’) the proposed 

rule change as described in Items I and 

II below, which Items have been 

prepared by FINRA. 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 

FINRA is proposing to amend the ByLaws of FINRA’s regulatory subsidiary 

(‘‘FINRA Regulation’’) with regard to 

District Committee structure and 

governance to, among other things, 

adjust the size and composition of 

District Committees to align more 

closely with the industry representation 

on the FINRA Board and replace District 

Nominating Committees with a process 

of direct nomination and election based 

on firm size, as discussed in more detail 

below. 

The text of the proposed rule change 

is available on FINRA’s Web site at 

http://www.finra.org, at the principal 

office of FINRA and at the 

Commission’s Public Reference Room. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, 

FINRA 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. FINRA has prepared 

summaries, set forth in sections A, B, 

and C below, of the most significant 

aspects of such statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

Background 

On July 30, 2007, NASD and the New 

York Stock Exchange consolidated their 

member firm regulation operations into 

a combined organization, FINRA. As 

part of the consolidation, the SEC 

approved amendments to the NASD ByLaws to implement governance and 

related changes.3 The approved changes 

included a FINRA Board governance 

structure that balanced public and 

industry representation and designated 

seven governor seats to represent 

member firms based on the criteria of 

firm size. 

FINRA Regulation (formerly known as 

NASD Regulation) is a subsidiary of 

FINRA that operates according to the 

Plan of Allocation and Delegation of 

Functions by NASD to Subsidiaries, as 

amended, which was first adopted at 

NASD Regulation’s formation in 1996.4

The proposed rule change would 

modify the FINRA Regulation By-Laws 

(or ‘‘By-Laws’’) with regard to District 

Committees in several respects. It 

would: 

• Adjust the size and composition of 

District Committees over a three-year 

transition period to align more closely 

with the industry representation on the 

FINRA Board; 

• Replace District Nominating 

Committees with a process of direct 

nomination and election based on firm 

size; 

• Codify current practice that District 

Committees meet on a regional basis; 

• Eliminate the Advisory Council; 

• Amend the qualification 

requirements and prescribe further term 

limits for District Committee members; 

• Revise procedures for qualification 

and accounting of ballots to be 

administered solely by an Independent 

Agent; and 

• Make other procedural and 

administrative changes. 

District Committees, District 

Nominating Committees, Districts and 

Regions 

The By-Laws establish the procedures 

for setting the size and electing the 

members to FINRA District Committees 

and District Nominating Committees.5

These By-Law provisions have not 

changed significantly since becoming 

permanently effective in January 1998.6

They were adopted in part to respond to 

undertakings ordered by the SEC in 

1996 (the ‘‘1996 SEC Settlement Order’’) 

concurrent with the issuance of a report 

pursuant to Section 21(a) of the 

Exchange Act regarding NASD (the 

‘‘1996 21(a) Report’’).7

The role of the District Committees 

was significantly narrowed as a result of 

undertakings in the 1996 SEC 

Settlement Order.8 Until January 1998, 


srobinson on DSKHWCL6B1PROD with NOTICES