Federal Register / Vol. 75, No. 219 / Monday, November 15, 2010 / Notices 69717 

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

2 17 CFR 240.19b–4. 

3Changes are marked to the rule text that appears 

in the electronic Nasdaq Manual found at http:// 

nasdaqomx.cchwallstreet.com. 

Total annual responses: 100. 

Total annual reporting hours: 33. 

Additional Information or Comments: 

Copies of the forms and supporting 

documents can be obtained from 

Charles Mierzwa, the agency clearance 

officer (312–751–3363) or 

Charles.Mierzwa@rrb.gov. 

Comments regarding the information 

collection should be addressed to 

Patricia Henaghan, Railroad Retirement 

Board, 844 North Rush Street, Chicago, 

Illinois 60611–2092 or 

Patricia.Henaghan@rrb.gov and to the 

OMB Desk Officer for the RRB, at the 

Office of Management and Budget, 

Room 10230, New Executive Office 

Building, Washington, DC 20503. 

Charles Mierzwa, 

Clearance Officer. 

[FR Doc. 2010–28600 Filed 11–12–10; 8:45 am] 

BILLING CODE 7905–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[File No. 500–1] 

In the Matter of: Edentify, Inc., Embryo 

Development Corp., Enclaves Group, 

Inc., Energytec, Inc., Enesco Group, 

Inc., Entertainment Is Us, Inc., Entrada 

Networks, Inc., Entropin, Inc., Epic 

Financial Corp., Epicus 

Communications Group, Inc., Epixtar 

Corp., Equisure, Inc., Equus Gaming 

Co., and Evans, Inc. (n/k/a Fur 

Company A), Order of Suspension of 

Trading 

November 10, 2010. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Edentify, 

Inc. because it has not filed any periodic 

reports since the period ended 

September 30, 2007. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Embryo 

Development Corp. because it has not 

filed any periodic reports since the 

period ended July 31, 2006. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Enclaves 

Group, Inc. because it has not filed any 

periodic reports since the period ended 

September 30, 2006. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Energytec, 

Inc. because it has not filed any periodic 

reports since the period ended 

September 30, 2007. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Enesco 

Group, Inc. because it has not filed any 

periodic reports since the period ended 

September 30, 2006. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of 

Entertainment Is Us, Inc. because it has 

not filed any periodic reports since the 

period ended June 30, 2006. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Entrada 

Networks, Inc. because it has not filed 

any periodic reports since the period 

ended April 30, 2005. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Entropin, 

Inc. because it has not filed any periodic 

reports since the period ended 

September 30, 2006. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Epic 

Financial Corp. because it has not filed 

any periodic reports since the period 

ended July 31, 2005. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Epicus 

Communications Group, Inc. because it 

has not filed any periodic reports since 

the period ended November 30, 2007. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Epixtar 

Corp. because it has not filed any 

periodic reports since the period ended 

June 30, 2005. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Equisure, 

Inc. because it has not filed any periodic 

reports since the period ended 

September 30, 1997. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Equus 

Gaming Co. because it has not filed any 

periodic reports since the fiscal year 

ended December 31, 2002. 

It appears to the Securities and 

Exchange Commission that there is a 

lack of current and accurate information 

concerning the securities of Evans, Inc. 

(n/k/a Fur Company A) because it has 

not filed any periodic reports since the 

period ended November 28, 1998. 

The Commission is of the opinion that 

the public interest and the protection of 

investors require a suspension of trading 

in the securities of the above-listed 

companies. 

Therefore, it is ordered, pursuant to 

Section 12(k) of the Securities Exchange 

Act of 1934, that trading in the 

securities of the above-listed companies 

is suspended for the period from 9:30 

a.m. EST on November 10, 2010, 

through 11:59 p.m. EST on November 

23, 2010. 

By the Commission. 

Jill M. Peterson, 

Assistant Secretary. 

[FR Doc. 2010–28775 Filed 11–10–10; 4:15 pm] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63276; File No. SR– 

NASDAQ–2010–138] 

Self-Regulatory Organizations; The 

NASDAQ Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change To Establish 

a Program for Managed Data Solutions 

November 8, 2010. 

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 October 

25, 2010, The NASDAQ Stock Market 

LLC (‘‘Nasdaq’’ or ‘‘Exchange’’) filed with 

the Securities and Exchange 

Commission (‘‘SEC’’ or ‘‘Commission’’) 

the proposed rule change as described 

in Items I, II, and III below, which Items 

have been prepared by Nasdaq. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of the Substance 

of the Proposed Rule Change 

Nasdaq proposes to establish a 

program for Managed Data Solutions. 

The text of the proposed rule change 

is below. Proposed new language is 

italicized; proposed deletions are in 

[brackets].3

* * * * * 

7026. Distribution Models [Reserved] 

(a) Reserved 

(b) Managed Data Solutions 


srobinson on DSKHWCL6B1PROD with NOTICES
69718 Federal Register / Vol. 75, No. 219 / Monday, November 15, 2010 / Notices 

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). 

The charges to be paid by Distributors 

and Subscribers of Managed Data 

Solutions products containing Nasdaq 

Depth data shall be: 

Fee schedule for Managed Data Solutions Price 

Managed Data Solution .................................................................................................................................................. $1,500/mo Per Distributor. 

Administration Fee (for the right to offer Managed Data Solutions to client organizations). 

Nasdaq Depth Data ........................................................................................................................................................ $300/mo Per Subscriber. 

Professional Subscriber Fee (Internal Use Only and includes TotalView, Level 2, OpenView).

Nasdaq Depth Data ........................................................................................................................................................ $60/mo Per Subscriber. 

Non-Professional Subscriber (Internal Use Only and includes TotalView, Level 2, OpenView). 

(d) Reserved 

* * * * * 

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 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. Nasdaq 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 

Nasdaq is proposing to create a new 

data distribution model (a Managed 

Data Feed Solution) to further the 

distribution of Nasdaq TotalView, 

Nasdaq OpenView and/or Nasdaq Level 

2 Information (collectively, ‘‘Nasdaq 

Depth Information’’). It offers a new 

delivery method available to firms 

seeking simplified market data 

administration. The Managed Data 

Solution may be offered by Distributors 

to clients and/or client organizations 

that are using the Nasdaq Depth 

Information internally. This new pricing 

and administrative option is in response 

to industry demand, as well as due to 

changes in the technology use [sic] to 

distribute market data. Distributors 

offering Managed Data Solutions 

continue to be fee liable for the 

applicable distributor fees for the 

receipt and distribution of the Nasdaq 

Depth Information. 

A Managed Data Solution is a delivery 

option that will assess a new, innovative 

fee schedule to Distributors of Nasdaq 

Depth Information that provide data 

feed solutions such as an Application 

Programming Interface (API) or similar 

automated delivery solutions to 

recipients with only limited entitlement 

controls (e.g., usernames and/or 

passwords) (‘‘Managed Data 

Recipients’’). However, the Distributor 

must first agree to reformat, redisplay 

and/or alter the Nasdaq Depth 

Information prior to retransmission, but 

not to affect the integrity of the Nasdaq 

Depth Information and not to render it 

inaccurate, unfair, uninformative, 

fictitious, misleading, or discriminatory. 

A Managed Data Solution is any 

retransmission data product containing 

Nasdaq Depth Information offered by a 

Distributor where the Distributor 

manages and monitors, but does not 

necessarily control, the information. 

However, the Distributor does maintain 

contracts with the Managed Data 

Recipients and is liable for any 

unauthorized use by the Managed Data 

Recipients under a Managed Data 

Solution. The recipient of a Managed 

Data Solution may use the information 

for internal purposes only and may not 

distribute the information outside of 

their [sic] organization. 

In the past, Nasdaq has considered 

this type of retransmission to be an 

uncontrolled data product if the 

Distributor does not control both the 

entitlements and the display of the 

information. Over the last ten years, 

Distributors have improved the 

technical delivery and monitoring of 

data and the Managed Data Solution 

offering responds to an industry need to 

administer these new types of technical 

deliveries. 

Currently, Nasdaq charges Managed 

Data Recipients who receive a Managed 

Data Solution the same distributor fees 

as a recipient of an uncontrolled data 

product. Some Distributors believe that 

the Managed Data Solution is a better 

controlled data product and as such 

should not be subject to the same rates 

as a data feed. However, the Distributors 

may only have contractual control over 

the data and may not be able to verify 

how Managed Data Recipients are 

actually using the data at least without 

involvement of the Managed Data 

Recipient. Some Distributors have even 

held-off on deployment of new Nasdaq 

product offerings, pending the 

resolution to this matter. Thus, offering 

a Managed Data Solution fee schedule 

would not only result in Nasdaq offering 

lower fees for existing Managed Data 

Recipients utilizing a Managed Data 

Solution, but will allow new 

Distributors to deliver Managed Data 

Solutions to new clients, thereby 

increasing transparency of the market. 

Nasdaq proposes to establish a 

program to offer the Managed Data 

Solution to Distributors that assist in the 

management of the uncontrolled data 

product on behalf of their Managed Data 

Recipients by contractually restricting 

the data flow and monitoring the 

delivery. 

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 Nasdaq 

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. 

The Commission concluded that 

Regulation NMS—by deregulating 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 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 75, No. 219 / Monday, November 15, 2010 / Notices 69719 

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. 

On July 21, 2010, President Barack 

Obama signed into law H.R. 4173, the 

Dodd-Frank Wall Street Reform and 

Consumer Protection Act of 2010 

(‘‘Dodd-Frank Act’’), which amended 

Section 19 of the Act. Among other 

things, Section 916 of the Dodd-Frank 

Act amended paragraph (A) of Section 

19(b)(3) of the Act by inserting the 

phrase ‘‘on any person, whether or not 

the person is a member of the selfregulatory organization’’ after ‘‘due, fee 

or other charge imposed by the selfregulatory organization.’’ As a result, all 

SRO rule proposals establishing or 

changing dues, fees, or other charges are 

immediately effective upon filing 

regardless of whether such dues, fees, or 

other charges are imposed on members 

of the SRO, non-members, or both. 

Section 916 further amended paragraph 

(C) of Section 19(b)(3) of the Exchange 

Act to read, in pertinent part, ‘‘At any 

time within the 60-day period beginning 

on the date of filing of such a proposed 

rule change in accordance with the 

provisions of paragraph (1) [of Section 

19(b)], the Commission summarily may 

temporarily suspend the change in the 

rules of the self-regulatory organization 

made thereby, 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 this title. If the Commission 

takes such action, the Commission shall 

institute proceedings under paragraph 

(2)(B) [of Section 19(b)] to determine 

whether the proposed rule should be 

approved or disapproved.’’ 

Nasdaq believes that these 

amendments to Section 19 of the Act 

reflect Congress’s intent to allow the 

Commission to rely upon the forces of 

competition to ensure that fees for 

market data are reasonable and 

equitably allocated. Although Section 

19(b) had formerly authorized 

immediate effectiveness for a ‘‘due, fee 

or other charge imposed by the selfregulatory organization,’’ the 

Commission adopted a policy and 

subsequently a rule stipulating that fees 

for data and other products available to 

persons that are not members of the selfregulatory organization must be 

approved by the Commission after first 

being published for comment. At the 

time, the Commission supported the 

adoption of the policy and the rule by 

pointing out that unlike members, 

whose representation in self-regulatory 

organization governance was mandated 

by the Act, non-members should be 

given the opportunity to comment on 

fees before being required to pay them, 

and that the Commission should 

specifically approve all such fees. 

Nasdaq believes that the amendment to 

Section 19 reflects Congress’s 

conclusion that the evolution of selfregulatory organization governance and 

competitive market structure have 

rendered the Commission’s prior policy 

on non-member fees obsolete. 

Specifically, many exchanges have 

evolved from member-owned not-forprofit corporations into for-profit 

investor-owned corporations (or 

subsidiaries of investor-owned 

corporations). Accordingly, exchanges 

no longer have narrow incentives to 

manage their affairs for the exclusive 

benefit of their members, but rather 

have incentives to maximize the appeal 

of their products to all customers, 

whether members or non-members, so 

as to broaden distribution and grow 

revenues. Moreover, we believe that the 

change also reflects an endorsement of 

the Commission’s determinations that 

reliance on competitive markets is an 

appropriate means to ensure equitable 

and reasonable prices. Simply put, the 

change reflects a presumption that all 

fee changes should be permitted to take 

effect immediately, since the level of all 

fees are constrained by competitive 

forces. 

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), 

although reviewing a Commission 

decision made prior to the effective date 

of the Dodd-Frank Act, 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’s conclusions about 

Congressional intent are therefore 

reinforced by the Dodd-Frank Act 

amendments, which create a 

presumption that exchange fees, 

including market data fees, may take 

effect immediately, without prior 

Commission approval, and that the 

Commission should take action to 

suspend a fee change and institute a 

proceeding to determine whether the fee 

change should be approved or 

disapproved only where the 

Commission has concerns that the 

change may not be consistent with the 

Act. 

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. 

Notwithstanding its determination that 

the Commission may rely upon 

competition to establish fair and 

equitably allocated fees for market data, 

the NetCoalition court found that the 

Commission had not, in that case, 

compiled a record that adequately 

supported its conclusion that the market 

for the data at issue in the case was 

competitive. For the reasons discussed 

above, Nasdaq believes that the DoddFrank Act amendments to Section 19 

materially alter the scope of the 

Commission’s review of future market 

data filings, by creating a presumption 

that all fees may take effect 

immediately, without prior analysis by 

the Commission of the competitive 

environment. Even in the absence of 

this important statutory change, 

however, Nasdaq believes that a record 

may readily be established to 

demonstrate the competitive nature of 

the market in question. 

There is intense competition between 

trading platforms that provide 

transaction execution and routing 

services and proprietary data products. 

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 the 

prospect of a taking order seeing and 

reacting to a posted order on a particular 

platform, the posting of the order would 

accomplish little. Without trade 

executions, exchange data products 

cannot exist. 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. 


srobinson on DSKHWCL6B1PROD with NOTICES
69720 Federal Register / Vol. 75, No. 219 / Monday, November 15, 2010 / Notices 

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 customers view the costs 

of transaction executions and of data as 

a unified cost of doing business with the 

exchange. A broker-dealer 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 broker-dealer 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 broker-dealer 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 brokerdealer because it does not provide 

information about the venue to which it 

is directing its orders. Data from the 

competing venue to which the brokerdealer is directing orders will become 

correspondingly more valuable. 

Thus, a super-competitive 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. However, 

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 

broker-dealer 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. Similarly, 

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. 

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. 

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 market for market data products 

is 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. 

Broker-dealers currently have 

numerous alternative venues for their 

order flow, including ten self-regulatory 

organization (‘‘SRO’’) markets, as well as 

internalizing broker-dealers (‘‘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. 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 broker-dealers’ 

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. 

Market data vendors provide another 

form of 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 Thomson Reuters that assess a 

surcharge on data they sell may refuse 

to offer proprietary products that end 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 75, No. 219 / Monday, November 15, 2010 / Notices 69721 

7 15 U.S.C. 78s(b)(3)(a)(ii). 

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. 

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. 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, 

and Thomson Reuters. 

The court in NetCoalition concluded 

that the Commission had failed to 

demonstrate that the market for market 

data was competitive based on the 

reasoning of the Commission’s 

NetCoalition order because, in the 

court’s view, the Commission had not 

adequately demonstrated that the depthof-book data at issue in the case is used 

to attract order flow. Nasdaq believes, 

however, that evidence not before the 

court clearly demonstrates that 

availability of data attracts order flow. 

For example, as of July 2010, 92 of the 

top 100 broker-dealers by shares 

executed on Nasdaq consumed NQDS 

and 80 of the top 100 broker-dealers 

consumed TotalView. During that 

month, the NQDS-users were 

responsible for 94.44% of the orders 

entered into Nasdaq and TotalView 

users were responsible for 92.98%. 

Competition among platforms has 

driven Nasdaq continually to improve 

its platform data offerings and to cater 

to customers’ data needs. For example, 

Nasdaq has developed and maintained 

multiple delivery mechanisms (IP, 

multi-cast, and compression) that enable 

customers to receive data in the form 

and manner they prefer and at the 

lowest cost to them. Nasdaq offers front 

end applications such as its 

‘‘Bookviewer’’ to help customers utilize 

data. Nasdaq has created new products 

like TotalView Aggregate to 

complement TotalView ITCH and Level 

2, because offering data in multiple 

formatting allows Nasdaq to better fit 

customer needs. Nasdaq offers data via 

multiple extranet providers, thereby 

helping to reduce network and total cost 

for its data products. Nasdaq has 

developed an online administrative 

system to provide customers 

transparency into their data feed 

requests and streamline data usage 

reporting. Nasdaq has also expanded its 

Enterprise License options that reduce 

the administrative burden and costs to 

firms that purchase market data. 

Despite these enhancements and a 

dramatic increase in message traffic, 

Nasdaq’s fees for market data have 

remained flat. In fact, as a percent of 

total customer costs, Nasdaq data fees 

have fallen relative to other data usage 

costs—including bandwidth, 

programming, and infrastructure—that 

have risen. The same holds true for 

execution services; despite numerous 

enhancements to Nasdaq’s trading 

platform, absolute and relative trading 

costs have declined. Platform 

competition has intensified as new 

entrants have emerged, constraining 

prices for both executions and for data. 

The vigor of competition for depth 

information is significant and the 

Exchange believes that this proposal 

clearly evidences such competition. 

Nasdaq is offering a new pricing model 

in order to keep pace with changes in 

the industry and evolving customer 

needs. It is entirely optional and is 

geared towards attracting new 

customers, as well as retaining existing 

customers. 

The Exchange has witnessed 

competitors creating new products and 

innovative pricing in this space over the 

course of the past year. Nasdaq 

continues to see firms challenge its 

pricing on the basis of the Exchange’s 

explicit fees being higher than the zeropriced fees from other competitors such 

as BATS. In all cases, firms make 

decisions on how much and what types 

of data to consume on the basis of the 

total cost of interacting with Nasdaq or 

other exchanges. Of course, the explicit 

data fees are but one factor in a total 

platform analysis. Some competitors 

have lower transactions fees and higher 

data fees, and others are vice versa. The 

market for this depth information is 

highly competitive and continually 

evolves as products develop and 

change. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were either 

solicited or received. 

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.7 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–2010–138 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–2010–138. This 


srobinson on DSKHWCL6B1PROD with NOTICES
69722 Federal Register / Vol. 75, No. 219 / Monday, November 15, 2010 / Notices 

8 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4For the purposes of this filing, the term ‘‘Users’’ 

includes any ‘‘ATP Holder,’’ as that term is defined 

in NYSE Amex (Options) Rule 900.2NY(4) and any 

‘‘Sponsored Participant,’’ as that term is defined in 

NYSE Amex (Options) Rule 900.2NY(77). 

5The Commission has approved proposed rule 

filings submitted by the Exchange (with respect to 

its equities business) and the Exchange’s affiliate, 

the New York Stock Exchange LLC to offer the same 

co-location services from the Mahwah data center 

at the same prices. See Securities Exchange Act 

Release No. 62961 (September 21, 2010), 75 FR 

59299 (September 27, 2010) (SR–NYSE–2010–56); 

Securities Exchange Act Release No. 62960 

(September 21, 2010) 75 FR 59310 (September 27, 

2010) (SR–NYSEAmex–2010–80). 

6The Exchange will announce the effective date 

of the fees set forth in this proposed rule change 

through a notice to Users. 

7The Exchange also allows Users, for a monthly 

fee (i.e., 40% of the applicable monthly per kW fee), 

to obtain an option for future use on available, 

unused cabinet space in proximity to their existing 

cabinet space. Specifically, Users may reserve 

cabinet space of up to 30% of the cabinet space 

under contract, which the Exchange will endeavor 

to provide as close as reasonably possible to the 

User’s existing cabinet space, taking into 

consideration power availability within segments of 

the data center and the overall efficiency of use of 

data center resources as determined by the 

Exchange. (If the 30% measurement results in a 

fractional cabinet, the cabinet count is adjusted up 

to the next increment.) If reserved cabinet space 

becomes needed for use, the reserving User will 

have 30 business days to formally contract with the 

Exchange for full payment for the reserved cabinet 

space needed or the space will be reassigned. 

8As set forth below, pricing for LCN access is 

provided on a stand-alone basis and on a bundled 

basis in combination with SFTI connections and 

optic connections to outside access centers and 

within the data center. The SFTI and optic 

connections are not related to the co-location 

services. 

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 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–NASDAQ–2010–138, and 

should be submitted on or before 

December 6, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–28548 Filed 11–12–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63274; File No. SR– 

NYSEAmex–2010–101] 

Self-Regulatory Organizations; NYSE 

Amex LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Amending Its Options 

Fee Schedule To Reflect Fees Charged 

for Co-location Services 

November 8, 2010. 

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

Securities Exchange Act of 1934 (the 

‘‘Act’’) 2 and Rule 19b–4 thereunder,3

notice is hereby given that, on October 

26, 2010, NYSE Amex LLC (‘‘NYSE 

Amex’’ or the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I and II 

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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend its 

Options Fee Schedule to reflect fees 

charged for co-location services, as 

described more fully herein. The text of 

the proposed rule change is available at 

the Exchange, the Commission’s Public 

Reference Room, on the Commission’s 

Web site at http://www.sec.gov, and 

http://www.nyse.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 those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

set forth in sections A, B, and C below, 

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend its 

Options Fee Schedule to identify fees 

pertaining to co-location services, which 

allow Users 4 of the Exchange to rent 

space on premises controlled by the 

Exchange in order that they may locate 

their electronic servers in close physical 

proximity to the Exchange’s trading and 

execution systems.5 The Exchange plans 

to offer these co-location services 

beginning in January 2011 at its data 

center in Mahwah New Jersey.6 The 

Exchange will offer space at the data 

center in cabinets with power usage 

capability of either four or eight 

kilowatts (kW).7 In addition, the 

Exchange will offer Users services 

related to co-location, including cross 

connections, equipment and cable 

installation, and remote ‘‘hot-hands’’ 

services. 

Users that receive co-location services 

from the Exchange will not receive any 

means of access to the Exchange’s 

trading and execution systems that is 

separate from or superior to that of 

Users that do not receive co-location 

services. All orders sent to the Exchange 

enter the Exchange’s trading and 

execution systems through the same 

order gateway regardless of whether the 

sender is co-located in the Exchange’s 

data center or not. In addition, colocated Users do not receive any market 

data or data service product that is not 

available to all Users. However, Users 

that receive co-location services 

normally would expect reduced 

latencies in sending orders to the 

Exchange and receiving market data 

from the Exchange. In addition, colocated Users have the option of 

obtaining access to the Exchange’s 

Liquidity Center Network (‘‘LCN’’), a 

local area network available in the data 

center.8 Co-located Users have the 

option of using either the LCN or the 

Exchange’s Secure Financial 

Transaction Infrastructure (‘‘SFTI’’) 

network, to which all Users have access. 

Because it operates as a local area 

network within the data center, the LCN 

provides reduced latencies in 

comparison with SFTI. Other than the 


srobinson on DSKHWCL6B1PROD with NOTICES