Federal Register / Vol. 75, No. 225 / Tuesday, November 23, 2010 / Notices 71475 

8 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3 ‘‘Core’’ data refers to the best-priced quotations 

and comprehensive last sale reports of all markets 

that the Commission requires a central processor to 

consolidate and distribute to the public pursuant to 

joint-SRO plans. ‘‘Non-core’’ data refers to products 

other than the consolidated products that markets 

offer collectively under joint industry plans. 

4A ‘‘distributor’’ of a Depth Feed is defined on the 

ISE Schedule of Fees as any firm that receives the 

Depth of Market data feed directly from ISE or 

indirectly through a redistributor and then 

distributes it either internally or externally. A 

redistributor includes market data vendors and 

connectivity providers such as extranets and private 

network providers. 

5A ‘‘controlled device’’ is defined on the ISE 

Schedule of Fees as any device that a distributor of 

the Depth of Market data feed permits to access the 

information in the Depth of Market Raw Data Feed. 

Number SR–DTC–2010–15 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 submission should refer to File 

Number SR–DTC–2010–15. 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 Section, 100 F Street, NE., 

Washington, DC 20549–1090, on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of such filings 

will also be available for inspection and 

copying at the principal office of DTC 

and on DTC’s Web site at http:// 

www.dtcc.com/downloads/legal/ 

rule_filings/2010/nscc/2010–11.pdf. 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–DTC–2010–15 and should 

be submitted on or before December 14, 

2010. 

For the Commission by the Division of 

Trading and Markets, pursuant to delegated 

authority.8

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–29401 Filed 11–22–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63324; File No. SR–ISE– 

2010–103] 

Self-Regulatory Organizations; 

International Securities Exchange, 

LLC; Notice of Filing and Immediate 

Effectiveness of Proposed Rule 

Change Relating to Market Data Fees 

November 17, 2010. 

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 November 

4, 2010, the International Securities 

Exchange, LLC (the ‘‘Exchange’’ or the 

‘‘ISE’’) filed with the Securities and 

Exchange Commission (‘‘Commission’’ 

or ‘‘SEC’’) 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 

The Exchange is proposing to amend 

its fees for its real-time depth of market 

data offering. The text of the proposed 

rule change is available on the 

Exchange’s Web site http:// 

www.ise.com, at the principal office of 

the Exchange, 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, the 

Exchange included statements 

concerning the purpose of, and basis for, 

the proposed rule change and discussed 

any comments it received on the 

proposed rule change. The text of these 

statements may be examined at the 

places specified in Item IV below. The 

self-regulatory organization has 

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 

ISE currently creates market data that 

consists of options quotes and orders 

and all trades that are executed on the 

Exchange. ISE also produces a Best Bid/ 

Offer, or BBO, with the aggregate size 

from all outstanding quotes and orders 

at the top price level, or the ‘‘top of 

book.’’ This ‘‘core’’ 3 data is formatted 

according to Options Price Reporting 

Authority (‘‘OPRA’’) specification and 

sent to OPRA for redistribution to the 

public. 

Pursuant to Securities and Exchange 

Commission (‘‘SEC’’) approval, the 

Exchange also offers a ‘‘non-core’’ data 

feed on a subscription basis called the 

ISE Depth of Market Data Feed (‘‘Depth 

Feed’’). The Depth Feed offering 

aggregates all quotes and orders at the 

top five price levels on the Exchange, on 

both the bid and offer side of the 

market. The Depth Feed offering 

consists of non-marketable orders and 

quotes that a prospective buyer or seller 

has chosen to display. Depth Feed, 

which is distributed in real time, 

provides subscribers with a 

consolidated view of tradable prices 

beyond the BBO. Depth Feed also shows 

additional liquidity and enhances 

transparency for ISE traded options that 

are not currently available through the 

OPRA feed. The offering is available to 

members and non-members, and to both 

professional and non-professional 

subscribers. 

The Exchange currently charges 

distributors 4 of Depth Feed $5,000 per 

month. In addition, the Exchange 

charges the distributor a monthly fee per 

controlled device 5 of (i) $50 per 

controlled device for Professionals at a 

distributor where the data is for internal 

use only, (ii) $50 per controlled device 

for Professionals who receive the data 

from a distributor where the data is 

further redistributed externally, and 

(iii) $5 per controlled device for NonProfessionals who receive the date from 

a distributor. The Exchange also has a 

fee cap currently in place where for any 

one month the combined maximum 

amount of fees payable by a distributor 

is as follows: (i) $7,500 for Professionals 

at a distributor where the data is for 

internal use only, (ii) $12,500 for 

mstockstill on DSKH9S0YB1PROD with NOTICES

71476 Federal Register / Vol. 75, No. 225 / Tuesday, November 23, 2010 / Notices 

6 15 U.S.C. 78f. 

7 15 U.S.C. 78f(b)(4). 

8Securities Exchange Act Release No. 51808 

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

Professionals where the data is further 

redistributed externally in a controlled 

device, and (iii) $10,000 for NonProfessionals who receive the data in a 

controlled device from a distributor. 

Additionally, in an effort to 

accommodate a distributor’s 

development effort to integrate the 

Depth Feed offering, the Exchange 

charges distributors a flat fee of $1,000 

for the first month after connectivity has 

been established between ISE and the 

distributor; the Exchange also waives all 

user fees during this one month period. 

In differentiating between 

Professional and Non-Professional 

subscribers, the Exchange proposes to 

apply the same criteria for qualification 

as a Non-Professional subscriber as the 

Consolidated Tape Association (‘‘CTA’’) 

Plan and Consolidated Quotation 

System Plan Participants use. 

Accordingly, a ‘‘Non-Professional 

Subscriber’’ is an authorized end-user of 

Depth of Market data who is a natural 

person and who is neither: (a) 

Registered or qualified with the 

Securities and Exchange Commission 

(the ‘‘Commission’’), the Commodities 

Futures Trading Commission, any state 

securities agency, any securities 

exchange or association, or any 

commodities or futures contract market 

or association; (b) engaged as an 

‘‘investment advisor’’ as that term is 

defined in Section 202(a)(11) of the 

Investment Advisers Act of 1940 

(whether or not registered or qualified 

under that act); nor (c) employed by a 

bank or other organization exempt from 

registration under Federal and/or state 

securities laws to perform functions that 

would require him/her to be so 

registered or qualified if he/she were to 

perform such functions for an 

organization not so exempt. A 

‘‘Professional Subscriber’’ is an 

authorized end-user of Depth of Market 

data that has not qualified as a NonProfessional Subscriber. 

The purpose of this filing is to lower 

the fee cap currently in place for 

Professionals who redistribute the data 

externally in a controlled device. Based 

on conversations ISE has had with 

prospective subscribers, the Exchange 

believes lowering the fee cap for this 

offering will lead to increased 

subscriptions. ISE therefore proposes to 

lower the cap for these professional 

subscribers from $12,500 to $10,000 per 

month. The Exchange is not proposing 

to make any other changes to the Depth 

Feed offering. 

2. Statutory Basis 

ISE believes that the proposed rule 

change is consistent with the provisions 

of Section 6 of the Act,6 in general, and 

with Section 6(b)(4) of the Act,7 in 

particular, in that it provides an 

equitable allocation of reasonable fees 

among users and recipients of ISE 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 heir 

own internal analysis of the need for such 

data.8

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. 

On July 21, 2010, President Barak 

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.’’ 

ISE 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. ISE 

believes that the amendment to Section 

19 reflects Congress’s conclusion that 

the evolution of self-regulatory 

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 nonmembers, so as 

to broaden distribution and grow 

revenues. Moreover, we believe that the 

change also reflects an endorsement of 

the Commission’s determinations that 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 75, No. 225 / Tuesday, November 23, 2010 / Notices 71477 

9NetCoalition, at 15 (quoting H.R. Rep. No. 94– 

229, at 92 (1975), as reprinted in 1975 U.S.C.C.A.N. 

321, 323). 

10See Securities Exchange Act Release Nos. 

63084 (October 13, 2010), 75 FR 64379 (October 19, 

2010) (Notice of Filing and Immediate Effectiveness 

of Proposed Rule Change To Revise an Optional 

Depth Data Enterprise License Fee for Broker-Dealer 

Distribution of Depth-of-Book Data) (SR–NASDAQ– 

2010–125); and 62887 (September 10, 2010), 75 FR 

57092 (September 17, 2010) (Notice of Filing and 

Immediate Effectiveness of Proposed Rule Change 

Relating to Market Data Feeds) (SR–PHLX–2010– 

121). 11NetCoalition, at 24. 

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.’ ’’ 9

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 

ISE 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 NetCoaltion 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, ISE 

believes that the Dodd-Frank 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, ISE believes that a 

record may readily be established to 

demonstrate the competitive nature of 

the market in question. 

As recently noted by a number of 

exchanges,10 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. 

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 decrease, 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. Thus, 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’.’’ 11

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 

mstockstill on DSKH9S0YB1PROD with NOTICES

71478 Federal Register / Vol. 75, No. 225 / Tuesday, November 23, 2010 / Notices 

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

13 17 CFR 240.19b–4(f)(2). 

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. 

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 numerous selfregulatory 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, nonSROs 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 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. 

Competition among platforms has 

driven ISE continually to improve its 

platform data offerings and to cater to 

customers’ data needs. For example, ISE 

has developed and maintained multiple 

delivery mechanisms that enable 

customers to receive data in the form 

and manner they prefer and at the 

lowest cost to them. ISE offers front end 

applications such as its PrecISE Trade 

application which helps customers 

utilize data. ISE offers data via multiple 

extranet providers, thereby helping to 

reduce network and total cost for its 

data products. ISE also offers an 

enterprise license option to help reduce 

the administrative burden and costs to 

firms that purchase market data. Despite 

these enhancements and a dramatic 

increase in message traffic, ISE’s fees for 

market data have, for the most part, 

remained flat or, as is the case with this 

proposal, decreased. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

The Exchange has not solicited, and 

does not intend to solicit, comments on 

this proposed rule change. The 

Exchange has not received any 

unsolicited written comments from 

members or other interested parties. 

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 12 and Rule 

19b–4(f)(2) 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. If the Commission 

takes such action, the Commission shall 

institute proceedings to determine 

whether the proposed rule change 

should be approved or disapproved. 

IV. Solicitation of Comments 

Interested persons are invited to 

submit written data, views, and 

arguments concerning the foregoing, 

including whether the proposed rule 

change is consistent with the Act. 

Comments may be submitted by any of 

the following methods: 

mstockstill on DSKH9S0YB1PROD with NOTICES

Federal Register / Vol. 75, No. 225 / Tuesday, November 23, 2010 / Notices 71479 

14 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The current FINRA rulebook consists of (1) 

FINRA Rules; (2) NASD Rules; and (3) rules 

incorporated from NYSE (‘‘Incorporated NYSE 

Rules’’) (together, the NASD Rules and Incorporated 

NYSE Rules are referred to as the ‘‘Transitional 

Rulebook’’). While the NASD Rules generally apply 

to all FINRA members, the Incorporated NYSE 

Rules apply only to those members of FINRA that 

are also members of the NYSE (‘‘Dual Members’’). 

The FINRA Rules apply to all FINRA members, 

unless such rules have a more limited application 

by their terms. For more information about the 

rulebook consolidation process, see Information 

Notice, March 12, 2008 (‘‘Rulebook Consolidation 

Process’’). For convenience, the Incorporated NYSE 

Rules are referred to as the NYSE Rules. 

4See Exchange Act Release No. 62718 (August 13, 

2010), 75 FR 51310 (August 19, 2010). This release 

was later amended to correct footnote crossreferences. Exchange Act Release No. 62718A 

(August 20, 2010), 75 FR 52562 (August 26, 2010). 

The Commission also published the corrected 

notice on its Web site. 

5See Letters from Steven B. Caruso, Maddox 

Hargett & Caruso, P.C. (Sept. 8, 2010) (‘‘Caruso 

Letter’’); Barry D. Estell, Attorney (Sept. 9, 2010) 

(‘‘Estell Letter’’); Barbara Black, Charles Hartsock 

Professor of Law and Director, Corporate Law 

Center, University of Cincinnati College of Law, and 

Jill I. Gross, Professor of Law and Director of Legal 

Skills and Director, Pace Investor Rights Clinic, 

Pace University School of Law (Sept. 9, 2010) 

(‘‘Black-Gross Letter’’); David P Neuman, Stoltmann 

Law Offices, PC (Sept. 9, 2010) (‘‘Neuman Letter’’); 

Richard M. Layne (Sept. 9, 2010) (‘‘Layne Letter’’); 

William A. Jacobson, Associate Clinical Professor of 

Law, Cornell Law School, and Director, Cornell 

Securities Law Clinic (Sept. 9, 2010) (‘‘Jacobson 

Letter’’); Scott R. Shewan, President, Public 

Investors Arbitration Bar Association (Sept. 9, 2010) 

(‘‘PIABA Letter’’); Pamela Lewis Marlborough, 

Associate General Counsel, Advocacy & Oversight, 

TIAA–CREF (Sept. 9, 2010) (‘‘TIAA–CREF Letter’’); 

Gary A. Sanders, Vice President, Securities and 

State Government Relations, National Association 

of Insurance and Financial Advisors (Sept. 9, 2010) 

(‘‘NAIFA Letter’’); Stephen Krosschell, Goodman 

Nekvasil, P.A. (Sept. 9, 2010) (‘‘Krosschell Letter’’); 

Sutherland Asbill & Brennan LLP, on behalf of the 

Committee of Annuity Insurers (Sept. 9, 2010) (‘‘CAI 

Letter’’); Lisa Catalano, Director, St. John’s 

University School of Law Securities Arbitration 

Clinic, (Sept. 9, 2010) (‘‘Catalano Letter’’); G. Mark 

Brewer, Esquire (Sept. 9, 2010) (‘‘Brewer Letter’’); 

Bari Havlik, SVP and Chief Compliance Officer, 

Charles Schwab & Co. Inc. (Sept. 9, 2010) (‘‘Schwab 

Letter’’); Peter J. Mougey, Levin, Papantonio, 

Thomas, Mitchell, Echsner, Rafferty, Proctor, P.A. 

(Sept. 9, 2010) (‘‘Mougey Letter’’); Al Van Kampen, 

Esquire (Sept. 10, 2010) (‘‘Van Kampen Letter’’); 

James T. McHale, Managing Director and Associate 

General Counsel, SIFMA (Sept. 14, 2010) (‘‘SIFMA 

Letter’’); John S. Markle, Deputy General Counsel, 

TD Ameritrade (Sept. 15, 2010) (‘‘TD Ameritrade 

Letter’’); Scott C. Ilgenfritz, Johnson, Pope, Bokor, 

Ruppel & Burns, LLP (Sept. 24, 2010) (‘‘Ilgenfritz 

Letter’’); Dale E. Brown, President and CEO, 

Financial Services Institute, Inc. (Sept. 27, 2010) 

(‘‘FSI Letter’’); Timothy R. Wing, President and CEO, 

CME Stock/Option Consulting Services, Inc. (Sept. 

28, 2010) (‘‘CME/OCS Letter’’). 6See Letter from James Wrona, Associate Vice 

President and Associate General Counsel, FINRA to 

Elizabeth M. Murphy, Secretary, Commission, dated 

October 21, 2010 (‘‘FINRA Response’’). 

7See Amendment No. 1 to FINRA–2010–039, 

dated October 21, 2010 (‘‘Amendment No. 1’’). The 

text of Amendment No. 1 is available on FINRA’s 

Web site at http://www.finra.org/web/groups/ 

industry/@ip/@reg/@rulfil/documents/rulefilings/ 

p122318.pdf, at the principal office of FINRA, and 

on the Commission’s Internet Web site (http:// 

www.sec.gov/rules/sro/finra.shtml). 

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 

No. SR–ISE–2010–103 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–ISE–2010–103. 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 Commissions 

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. Copies of such filing 

also will be available for inspection and 

copying at the principal office of the 

ISE. 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–ISE–2010–103 and should 

be submitted by December 14, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.14

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–29402 Filed 11–22–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–63325; File No. SR–FINRA– 

2010–039] 

Self-Regulatory Organizations; 

Financial Industry Regulatory 

Authority, Inc.; Notice of Filing of 

Amendment No. 1 to a Proposed Rule 

Change and Order Granting 

Accelerated Approval of a Proposed 

Rule Change, as Modified by 

Amendment No. 1, To Adopt FINRA 

Rules 2090 (Know Your Customer) and 

2111 (Suitability) in the Consolidated 

FINRA Rulebook 

November 17, 2010. 

I. Introduction 

On July 30, 2010, the 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’’), 

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

Securities Exchange Act of 1934 (the 

‘‘Exchange Act’’) 1 and Rule 19b–4 

thereunder,2 a proposed rule change to 

adopt FINRA Rule 2090 (Know Your 

Customer) and FINRA Rule 2111 

(Suitability) in the consolidated FINRA 

rulebook (‘‘Consolidated FINRA 

Rulebook’’).3 The Commission 

published the proposed rule change in 

the Federal Register.4

The Commission received 22 

comments in response to the proposed 

rule change.5 On September 21, 2010, 

FINRA responded to the comments 6

and filed Amendment No. 1 to the 

proposed rule change.7 The Commission 

is publishing this notice and order to 

solicit comments on Amendment No. 1 

and to approve the proposed rule 

change, as amended, on an accelerated 

basis. 

II. Description of the Proposed Rule 

Change 

As part of the process of developing 

the Consolidated FINRA Rulebook, 

FINRA proposed FINRA Rule 2090 

(Know Your Customer) and FINRA Rule 

2111 (Suitability). The ‘‘know your 

customer’’ and suitability obligations are 

critical to ensuring investor protection 

and fair dealing with customers. 

FINRA’s proposed rule change was 

designed to retain the core features of 

these obligations (set forth in NYSE 

Rule 405(1) and NASD Rule 2310), 

while modifying both rules to 

strengthen and clarify them. 

The proposed rule change built on a 

similar proposed rule change on which 

mstockstill on DSKH9S0YB1PROD with NOTICES