40578 Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / Notices 

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

2 17 CFR 240.19b–4. 

3This proposed change was initially filed on July 

3, 2018, and became immediately effective on that 

date. See SR–Phlx–2018–51, available at http://

nasdaq.cchwallstreet.com/. It was subsequently 

refiled on July 17, 2018. See SR–Phlx–2018–52, 

available at http://nasdaq.cchwallstreet.com/. A 

firm eligible to purchase the enterprise license 

proposed by Nasdaq may purchase it for the month 

of July, effective on July 3, 2018, and the monthly 

fee for the license will be prorated for the period 

July 3 through July 31, 2018. Any fees owed by the 

purchaser of the enterprise license for the use of 

NLS Plus on July 1 and July 2, 2018, will also be 

prorated accordingly. 

can be accessed through compliance 

with the requirements of 39 CFR 

3007.40. 

The Commission invites comments on 

whether the Postal Service’s request(s) 

in the captioned docket(s) are consistent 

with the policies of title 39. For 

request(s) that the Postal Service states 

concern market dominant product(s), 

applicable statutory and regulatory 

requirements include 39 U.S.C. 3622, 39 

U.S.C. 3642, 39 CFR part 3010, and 39 

CFR part 3020, subpart B. For request(s) 

that the Postal Service states concern 

competitive product(s), applicable 

statutory and regulatory requirements 

include 39 U.S.C. 3632, 39 U.S.C. 3633, 

39 U.S.C. 3642, 39 CFR part 3015, and 

39 CFR part 3020, subpart B. Comment 

deadline(s) for each request appear in 

section II. 

II. Docketed Proceeding(s) 

1. Docket No(s).: CP2017–249; Filing 

Title: Notice of the United States Postal 

Service of Filing Modification Two to a 

Global Plus 3 Negotiated Service 

Agreement; Filing Acceptance Date: 

August 9, 2018; Filing Authority: 39 CFR 

3015.5; Public Representative: 

Christopher C. Mohr; Comments Due: 

August 17, 2018. 

2. Docket No(s).: CP2018–283; Filing 

Title: Notice of the United States Postal 

Service Filing of a Functionally 

Equivalent International Business Reply 

Service Competitive Contract 3 

Negotiated Service Agreement; Filing 

Acceptance Date: August 9, 2018; Filing 

Authority: 39 CFR 3015.5; Public 

Representative: Christopher C. Mohr; 

Comments Due: August 17, 2018. 

3. Docket No(s).: MC2018–204 and 

CP2018–284; Filing Title: USPS Request 

to Add Priority Mail Contract 460 to 

Competitive Product List and Notice of 

Filing Materials Under Seal; Filing 

Acceptance Date: August 9, 2018; Filing 

Authority: 39 U.S.C. 3642 and 39 CFR 

3020.30 et seq.; Public Representative: 

Christopher C. Mohr; Comments Due: 

August 17, 2018. 

4. Docket No(s).: MC2018–205 and 

CP2018–285; Filing Title: USPS Request 

to Add Priority Mail Contract 461 to 

Competitive Product List and Notice of 

Filing Materials Under Seal; Filing 

Acceptance Date: August 9, 2018; Filing 

Authority: 39 U.S.C. 3642 and 39 CFR 

3020.30 et seq.; Public Representative: 

Christopher C. Mohr; Comments Due: 

August 17, 2018. 

This Notice will be published in the 

Federal Register. 

Stacy L. Ruble, 

Secretary. 

[FR Doc. 2018–17585 Filed 8–14–18; 8:45 am] 

BILLING CODE 7710–FW–P 

POSTAL SERVICE 

Product Change—Priority Mail 

Negotiated Service Agreement 

AGENCY: Postal ServiceTM. 

ACTION: Notice. 

SUMMARY: The Postal Service gives 

notice of filing a request with the Postal 

Regulatory Commission to add a 

domestic shipping services contract to 

the list of Negotiated Service 

Agreements in the Mail Classification 

Schedule’s Competitive Products List. 

DATES: Date of required notice: August 

15, 2018. 

FOR FURTHER INFORMATION CONTACT: 

Elizabeth Reed, 202–268–3179. 

SUPPLEMENTARY INFORMATION: The 

United States Postal Service® hereby 

gives notice that, pursuant to 39 U.S.C. 

3642 and 3632(b)(3), on August 9, 2018, 

it filed with the Postal Regulatory 

Commission a USPS Request to Add 

Priority Mail Contract 461 to 

Competitive Product List. Documents 

are available at www.prc.gov, Docket 

Nos. MC2018–205, CP2018–285. 

Elizabeth Reed, 

Attorney, Corporate and Postal Business Law. 

[FR Doc. 2018–17501 Filed 8–14–18; 8:45 am] 

BILLING CODE 7710–12–P 

POSTAL SERVICE 

Product Change—Priority Mail 

Negotiated Service Agreement 

AGENCY: Postal ServiceTM. 

ACTION: Notice. 

SUMMARY: The Postal Service gives 

notice of filing a request with the Postal 

Regulatory Commission to add a 

domestic shipping services contract to 

the list of Negotiated Service 

Agreements in the Mail Classification 

Schedule’s Competitive Products List. 

DATES: Date of required notice: August 

15, 2018. 

FOR FURTHER INFORMATION CONTACT: 

Elizabeth Reed, 202–268–3179. 

SUPPLEMENTARY INFORMATION: The 

United States Postal Service® hereby 

gives notice that, pursuant to 39 U.S.C. 

3642 and 3632(b)(3), on August 9, 2018, 

it filed with the Postal Regulatory 

Commission a USPS Request to Add 

Priority Mail Contract 460 to 

Competitive Product List. Documents 

are available at www.prc.gov, Docket 

Nos. MC2018–204, CP2018–284. 

Elizabeth Reed, 

Attorney, Corporate and Postal Business Law. 

[FR Doc. 2018–17500 Filed 8–14–18; 8:45 am] 

BILLING CODE 7710–12–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83811; File No. SR–Phlx– 

2018–53) 

Self-Regulatory Organizations; Nasdaq 

PHLX LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Incorporate the ‘‘PSX 

Last Sale and Nasdaq Last Sale Plus 

Data Feeds’’ Into the Market Data 

Enterprise License Proposed by the 

Nasdaq Stock Market LLC 

August 9, 2018 

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 July 27, 

2018, Nasdaq PHLX LLC (‘‘Phlx’’ 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 the Exchange. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

This amendment is immediately 

effective upon filing.3

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to incorporate 

the ‘‘PSX Last Sale and Nasdaq Last Sale 

Plus Data Feeds’’ into the market data 

enterprise license proposed by the 

Nasdaq Stock Market LLC (‘‘Nasdaq’’), 

which is designed to lower fees, reduce 

administrative costs, and expand the 

availability of Nasdaq Last Sale (‘‘NLS’’) 

Plus, NLS, Nasdaq Basic and Nasdaq 

Depth-of-Book products. The proposal is 

described in further detail below. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://nasdaqphlx.cchwallstreet.com/, 

at the principal office of the Exchange, 

and at the Commission’s Public 

Reference Room. 


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Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / Notices 40579 

4See SR–NASDAQ–2018–058 (not yet 

published). 

5The three last sale products consist of Nasdaq 

Last Sale, BX Last Sale, and PSX Last Sale. PSX Last 

Sale consists of two data feeds containing real-time 

last sale information for trades executed on the 

Exchange. ‘‘PSX Last Sale for Nasdaq’’ contains all 

transaction reports for Nasdaq-listed securities. 

‘‘PSX Last Sale for NYSE/NYSEAmex’’ contains all 

such transaction reports for securities listed on 

NYSE, NYSE Amex, and other exchanges. 

6The Nasdaq, Inc. U.S. equity markets are Nasdaq 

PSX, Nasdaq, and Nasdaq BX. 

7Tape A and Tape B securities are disseminated 

pursuant to the Security Industry Automation 

Corporation’s (‘‘SIAC’’) Consolidated Tape 

Association Plan/Consolidated Quotation System, 

or CTA/CQS (‘‘CTA’’). Tape C securities are 

disseminated pursuant to the NASDAQ Unlisted 

Trading Privileges (‘‘UTP’’) Plan. 

8The fee applies to both Internal and External 

Distributors. See PSX Last Sale and Nasdaq Last 

Sale Plus Data Feeds, Subsection (b)(1). ‘‘Internal 

Distributors’’ are Distributors that receive NLS Plus 

data and then distribute that data to one or more 

Subscribers within the Distributor’s own entity. 

‘‘External Distributors’’ are Distributors that receive 

NLS Plus data and then distribute that data to one 

or more Subscribers outside the Distributor’s own 

entity. 

9See PSX Last Sale and Nasdaq Last Sale Plus 

Data Feeds, Subsection (b)(3). 

10The Exchange also proposes a technical change 

to the PSX Last Sale and Nasdaq Last Sale Plus Data 

Feeds to reflect that PSX administrative fees are 

charged on a monthly, rather than annual, basis. 

See Securities Exchange Act Release No. 79654 

(December 22, 2016), 81 FR 96140 (December 29, 

2016) (SR–Phlx–2016–122). 

11 ‘‘Investment Adviser’’ is defined in Section 

202(a)(11) of the Investment Advisers Act of 1940, 

as ‘‘any person who, for compensation, engages in 

the business of advising others, either directly or 

through publications or writings, as to the value of 

securities or as to the advisability of investing in, 

purchasing, or selling securities, or who, for 

compensation and as part of a regular business, 

issues or promulgates analyses or reports 

concerning securities . . . .’’ 

12See, e.g., Enterprise Fee for the Cboe Equities 

One Feed, available at https://markets.cboe.com/us/ 

equities/market_data_products/bats_one/. 

13See n. 4. 

14 15 U.S.C. 78f(b). 

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

16For example, the Commission has permitted 

pricing discounts for market data under Nasdaq 

Continued 

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 

Exchange 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 Exchange proposes to incorporate 

the ‘‘PSX Last Sale and Nasdaq Last Sale 

Plus Data Feeds’’ into the market data 

enterprise license proposed by Nasdaq,4

which is designed to lower fees, reduce 

administrative costs, and expand the 

availability of NLS Plus, NLS, Nasdaq 

Basic and Nasdaq Depth-of-Book 

products (TotalView and Level 2). 

NLS Plus is a comprehensive data 

feed offered by Nasdaq that allows 

distributors to access the three last sale 

products 5 offered by Nasdaq and its 

affiliated U.S. equity exchanges,6 as 

well as the FINRA/Nasdaq Trade 

Reporting Facility (‘‘TRF’’). It provides 

total cross-market volume information 

at the issue level, and reflects the 

cumulative consolidated volume of realtime trading activity for Tape A, B and 

C securities.7 NLS Plus provides Trade 

Price, Trade Size, Sale Condition 

Modifiers, Cumulative Consolidated 

Market Volume, End of Day Trade 

Summary, Adjusted Closing Price, IPO 

Information, and Bloomberg ID. 

Additionally, pertinent regulatory 

information such as Market Wide 

Circuit Breaker, Regulation SHO Short 

Sale Price Test Restricted Indicator, 

Trading Action, and Symbol Directory 

are included. NLS Plus may be received 

by itself or in combination with 

NASDAQ Basic. 

Firms that receive NLS Plus pay the 

monthly administrative fees for PSX 

Last Sale, BX Last Sale and NLS, and 

distributors pay a data consolidation fee 

of $350 per month.8 The Exchange does 

not currently charge user fees for PSX 

Last Sale, but firms that receive NLS 

Plus would be required to pay any user 

fees adopted by the Exchange.9

The Exchange proposes to incorporate 

any fees owed under the PSX Last Sale 

and Nasdaq Last Sale Plus Data Feeds 

into the market data enterprise license 

proposed by Nasdaq, which is designed 

to lower fees, reduce administrative 

costs, and expand the availability of 

NLS Plus, NLS, Nasdaq Basic and 

Nasdaq Depth-of-Book products. These 

fees include the monthly administrative 

fee applicable to NLS, PSX Last Sale 

and BX Last Sale, a data consolidation 

fee for Internal or External Distributors, 

and any user fees for PSX Last Sale or 

BX Last Sale that may be adopted in the 

future.10

As set forth in greater detail under the 

Nasdaq proposal, the market data 

enterprise license for display usage 

proposed by Nasdaq will allow 

Distributors who are broker-dealers or 

Investment Advisers 11 to disseminate 

these products to a wide audience for a 

monthly fee of $600,000, with the 

opportunity to lower that fee further to 

$500,000 per month if they contract for 

twelve months of service in advance. As 

explained in greater detail in Nasdaq’s 

filing, the Exchange believes that the 

proposed market data enterprise license 

will reduce exchange fees, lower 

administrative costs for distributors, and 

help expand the availability of market 

information to investors, and thereby 

increase participation in financial 

markets. The enterprise license is being 

introduced in response to competition 

from other exchanges,12 and 

demonstrates both the power and the 

benefits of the competitive market to 

spur innovation and change. 

The purpose of this filing is to 

incorporate PSX Last Sale fees into the 

Nasdaq market data enterprise license as 

a means of lowering costs for all three 

equity markets. The rationale and 

support for this proposal are the same 

as already set forth by Nasdaq in its 

companion proposal.13

The proposed enterprise license is 

optional in that no exchange is required 

to offer it and distributors are not 

required to purchase it. Firms can 

discontinue its use at any time and for 

any reason, and may decide to purchase 

market data products individually or 

substitute products from one exchange 

with competing products from other 

exchanges. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,14 in general, and furthers the 

objectives of Sections 6(b)(4) and 6(b)(5) 

of the Act,15 in particular, in that it 

provides for the equitable allocation of 

reasonable dues, fees and other charges 

among members and issuers and other 

persons using any facility, and is not 

designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

As described above, the proposal to 

cover PSX fees for NLS Plus within the 

proposed market data enterprise license 

will lower fees, reduce administrative 

costs, and expand the availability of 

market data to retail investors, which 

the Exchange expects to improve 

transparency for financial market 

participants and lead to increased 

participation in financial markets. 

Discounts for broader dissemination of 

market data information have routinely 

been adopted by exchanges and 

permitted by the Commission as 

equitable allocations of reasonable dues, 

fees and other charges.16 Distributors 


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40580 Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / Notices 

Rules 7023(c) and 7047(b). See also Securities 

Exchange Act Release No. 82182 (November 30, 

2017), 82 FR 57627 (December 6, 2017) (SR–NYSE– 

2017–60) (changing an enterprise fee for NYSE BBO 

and NYSE Trades). 

17See n. 12. 

18Securities Exchange Act Release No. 59039 

(December 2, 2008), 73 FR 74770 (December 9, 

2008) (SR–NYSEArca–2006–21). 

19 Id. 

20 Id. 

21See Securities Exchange Act Release No. 51808 

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

(‘‘Regulation NMS Adopting Release’’). 

will be free to move from the month to 

month rate to the annual rate at any 

time, or from the annual rate to the 

monthly rate, with notice, at the 

expiration of the twelve month term. 

This proposal demonstrates the 

existence of an effective, competitive 

market because it resulted from a need 

to generate innovative approaches in 

response to competition from other 

exchanges that offer enterprise licenses 

for market data.17 As the Commission 

has recognized, ‘‘[i]f competitive forces 

are operative, the self-interest of the 

exchanges themselves will work 

powerfully to constrain unreasonable or 

unfair behavior,’’ 18 and ‘‘the existence 

of significant competition provides a 

substantial basis for finding that the 

terms of an exchange’s fee proposal are 

equitable, fair, reasonable, and not 

unreasonably or unfairly 

discriminatory.’’ 19 The proposed 

enterprise license will be subject to 

significant competition from other 

exchanges because each eligible 

distributor will have the ability to 

accept or reject the license depending 

on whether it will or will not lower its 

fees, and because other exchanges will 

be able to offer their own competitive 

responses. As the Commission has held 

in the past, the presence of competition 

provides a substantial basis for a finding 

that the proposal will be an equitable 

allocation of reasonable dues, fees and 

other charges.20

Furthermore, the proposed enterprise 

license will not unfairly discriminate 

between customers, issuers, brokers or 

dealers. The Act does not prohibit all 

distinctions among customers, but only 

discrimination that is unfair, and it is 

not unfair discrimination to charge 

those distributors that are able to reach 

the largest audiences of retail investors 

a lower fee for incremental investors in 

order to encourage the widespread 

distribution of market data. The 

proposed change to the PSX rule book 

is designed to incorporate the PSX Last 

Sale and Nasdaq Last Sale Plus Data 

Feeds into the market data enterprise 

license proposed by Nasdaq. As 

explained in the Nasdaq filing, the 

market data enterprise license will be 

subject to significant competition, and 

that competition will ensure that there 

is no unfair discrimination. Each 

distributor will be able to accept or 

reject the license depending on whether 

it will or will not lower costs for that 

particular distributor, and, if the license 

is not sufficiently competitive, the 

Exchange may lose market share. 

In adopting Regulation NMS, the 

Commission granted SROs and brokerdealers 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.21

The Commission was speaking to the 

question of whether broker-dealers 

should be subject to a regulatory 

requirement to purchase data, such as 

Depth-of-Book data, that is in excess of 

the data provided through the 

consolidated tape feeds, and the 

Commission concluded that the choice 

should be left to them. Accordingly, 

Regulation NMS removed unnecessary 

regulatory restrictions on the ability of 

exchanges to sell their own data, 

thereby advancing the goals of the Act 

and the principles reflected in its 

legislative history. If the free market 

should determine whether proprietary 

data is sold to broker-dealers at all, it 

follows that the price at which such 

data is sold should be set by the market 

as well. 

The proposed change to the PSX rule 

book is designed to incorporate the PSX 

Last Sale and Nasdaq Last Sale Plus 

Data Feeds into the market data 

enterprise license proposed by Nasdaq, 

and the proposed enterprise license will 

compete with other enterprise licenses 

offered by Nasdaq, underlying fee 

schedules promulgated by the 

Exchange, and enterprise licenses and 

fee structures implemented by other 

exchanges. The enterprise license is a 

voluntary product for which market 

participants can readily find substitutes. 

Accordingly, both PSX and Nasdaq are 

constrained from introducing a fee that 

would be inequitable or unfairly 

discriminatory. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will impose 

any burden on competition not 

necessary or appropriate in furtherance 

of the purposes of the Act. This 

proposal will eliminate PSX fees for 

NLS Plus as part of a market data 

enterprise license proposed by Nasdaq 

that is intended to lower fees, reduce 

administrative costs, and expand the 

availability of market data to retail 

investors, which the Exchange expects 

to lead to increased participation in 

financial markets. It will not impose a 

burden on competition not necessary or 

appropriate in furtherance of the 

purposes of the Act, but rather will 

enhance competition by introducing an 

innovative fee structure for market data, 

lowering prices and enhancing 

competition. 

The market for data products is 

extremely competitive and firms may 

freely choose alternative venues and 

data vendors based on the aggregate fees 

assessed, the data offered, and the value 

provided. Numerous exchanges compete 

with each other for listings, trades, and 

market data itself, providing virtually 

limitless opportunities for entrepreneurs 

who wish to produce and distribute 

their own market data. This proprietary 

data is produced by each individual 

exchange, as well as other entities, in a 

vigorously competitive market. 

Transaction execution and proprietary 

data products are complementary in that 

market data is both an input and a 

byproduct of the execution service. In 

fact, market data and trade execution are 

a paradigmatic example of joint 

products with joint costs. The decision 

whether and on which platform to post 

an order will depend on the attributes 

of the platform where the order can be 

posted, including the execution fees, 

data quality and price, and distribution 

of its data products. Without trade 

executions, exchange data products 

cannot exist. Moreover, data products 

are valuable to many end users only 

insofar as they provide information that 

end users expect will assist them or 

their customers in making trading 

decisions. 

The costs of producing market data 

include not only the costs of the data 

distribution infrastructure, but also the 

costs of designing, maintaining, and 

operating the exchange’s transaction 


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Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / Notices 40581 

22See William J. Baumol and Daniel G. Swanson, 

‘‘The New Economy and Ubiquitous Competitive 

Price Discrimination: Identifying Defensible Criteria 

of Market Power,’’ Antitrust Law Journal, Vol. 70, 

No. 3 (2003). 

23Cf. Ohio v. American Express, No. 16–1454 (S. 

Ct. June 25, 2018), https://www.supremecourt.gov/ 

opinions/17pdf/16-1454_5h26.pdf (recognizing the 

need to analyze both sides of a two sided platform 

market in order to determine its competitiveness). 

24 15 U.S.C. 78s(b)(3)(A)(ii). 

execution platform, the cost of 

implementing cybersecurity to protect 

the data from external threats 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, the operation of the 

Exchange is characterized by high fixed 

costs and low marginal costs. This cost 

structure is common in content and 

content distribution industries such as 

software, where developing new 

software typically requires a large initial 

investment (and continuing large 

investments to upgrade the software), 

but once the software is developed, the 

incremental cost of providing that 

software to an additional user is 

typically small, or even zero (e.g., if the 

software can be downloaded over the 

internet after being purchased).22

It is costly for the Exchange to build 

and maintain a trading platform, but the 

incremental cost of trading each 

additional share on an existing platform, 

or distributing an additional instance of 

data, is very low. Market information 

and executions are each produced 

jointly (in the sense that the activities of 

trading and placing orders are the 

source of the information that is 

distributed) and each are subject to 

significant scale economies. In such 

cases, marginal cost pricing is not 

feasible because if all sales were priced 

at the margin, the Exchange would be 

unable to defray its platform costs of 

providing the joint products. Similarly, 

data products cannot make use of trade 

reports from the TRF without the raw 

material of the trade reports themselves, 

and therefore necessitate the costs of 

operating, regulating, and maintaining a 

trade reporting system, costs that must 

be covered through the fees charged for 

use of the facility and sales of associated 

data. 

An exchange’s broker-dealer 

customers view the costs of transaction 

executions and of data as a unified cost 

of doing business with the exchange. A 

broker-dealer will disfavor a particular 

exchange if the expected revenues from 

executing trades on the exchange do not 

exceed net transaction execution costs 

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

trading decisions (or those of its 

customers). The choice of data products 

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

products in making profitable trading 

decisions. If the cost of the product 

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

Moreover, as a broker-dealer chooses to 

direct fewer orders to a particular 

exchange, the value of the product to 

that broker-dealer decreases, for two 

reasons. First, the product will contain 

less information, because executions of 

the broker-dealer’s trading activity 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 more orders will 

become correspondingly more valuable. 

Similarly, vendors provide price 

discipline for proprietary data products 

because they control the primary means 

of access to end users. Vendors impose 

price restraints based upon their 

business models. For example, vendors 

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 

impose a discipline by providing only 

data that will enable them to attract 

‘‘eyeballs’’ that contribute to their 

advertising revenue. Retail brokerdealers offer their retail 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. Exchanges, 

TRFs, and other producers of 

proprietary data products must 

understand and respond to these 

varying business models and pricing 

disciplines in order to market 

proprietary data products successfully. 

Moreover, the Exchange believes that 

market data products can enhance order 

flow by providing more widespread 

distribution of information about 

transactions in real time, thereby 

encouraging wider participation in the 

market by investors with access to the 

internet or television. Conversely, the 

value of such products to Distributors 

and investors decreases if order flow 

falls, because the products contain less 

content. 

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. Such regulation is 

unnecessary because an ‘‘excessive’’ 

price for one of the joint products will 

ultimately have to be reflected in lower 

prices for other products sold by the 

firm, or otherwise the firm will 

experience a loss in the volume of its 

sales that will be adverse to its overall 

profitability. In other words, an increase 

in the price of data will ultimately have 

to be accompanied by a decrease in the 

cost of executions, or the volume of both 

data and executions will fall.23

Moreover, the level of competition 

and contestability in the market is 

evident in the numerous alternative 

venues that compete for order flow, 

including SRO markets, internalizing 

broker-dealers 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 TRFs compete 

to attract internalized transaction 

reports. It is common for broker-dealers 

to further exploit this competition by 

sending their order flow and transaction 

reports to multiple markets, rather than 

providing them all to a single market. 

Competitive markets for order flow, 

executions, and transaction reports 

provide pricing discipline for the inputs 

of proprietary data products. The large 

number of SROs, TRFs, broker-dealers, 

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 broker-dealer 

is currently permitted to produce 

proprietary data products, and many 

currently do or have announced plans to 

do so, including Nasdaq, NYSE, NYSE 

American, NYSE Arca, IEX, and BATS/ 

Direct Edge. 

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.24

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: (i) Necessary or appropriate in 


daltland on DSKBBV9HB2PROD with NOTICES
40582 Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / Notices 

25 17 CFR 200.30–3(a)(12). 

the public interest; (ii) for the protection 

of investors; or (iii) 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 email to rule-comments@

sec.gov. Please include File Number SR– 

Phlx–2018–53 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Secretary, Securities and Exchange 

Commission, 100 F Street NE, 

Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–Phlx–2018–53. This file 

number should be included on the 

subject line if email is used. To help the 

Commission process and review your 

comments more efficiently, please use 

only one method. The Commission will 

post all comments on the Commission’s 

internet website (http://www.sec.gov/ 

rules/sro.shtml). Copies of the 

submission, all subsequent 

amendments, all written statements 

with respect to the proposed rule 

change that are filed with the 

Commission, and all written 

communications relating to the 

proposed rule change between the 

Commission and any person, other than 

those that may be withheld from the 

public in accordance with the 

provisions of 5 U.S.C. 552, will be 

available for website viewing and 

printing in the Commission’s Public 

Reference Room, 100 F Street NE, 

Washington, DC 20549 on official 

business days between the hours of 

10:00 a.m. and 3:00 p.m. Copies of the 

filing also will be available for 

inspection and copying at the principal 

office of the Exchange. All comments 

received will be posted without change. 

Persons submitting comments are 

cautioned that we do not redact or edit 

personal identifying information from 

comment submissions. You should 

submit only information that you wish 

to make available publicly. All 

submissions should refer to File 

Number SR–Phlx–2018–53 and should 

be submitted on or before September 5, 

2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.25

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–17492 Filed 8–14–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Proposed Collection; Comment 

Request 

Upon Written Request, Copies Available 

From: Securities and Exchange 

Commission, Office of FOIA Services, 

100 F Street NE, Washington, DC 

20549–2736. 

Extension: 

Regulation S–P. SEC File No. 270–480; 

OMB Control No. 3235–0537. 

Notice is hereby given that, pursuant 

to the Paperwork Reduction Act of 1995 

(‘‘PRA’’) (44 U.S.C. 3501 et seq.), the 

Securities and Exchange Commission 

(‘‘Commission’’) is soliciting comments 

on the existing collection of information 

provided for in the privacy notice and 

opt out notice provisions of Regulation 

S–P—Privacy of Consumer Financial 

Information (17 CFR part 248, subpart 

A) under the Securities Exchange Act of 

1934 (‘‘Exchange Act’’) (15 U.S.C. 78a et 

seq.). The Commission plans to submit 

this existing collection of information to 

the Office of Management and Budget 

(‘‘OMB’’) for extension and approval. 

The privacy notice and opt out notice 

provisions of Regulation S–P (the 

‘‘Rule’’) implement the privacy notice 

and opt out notice requirements of Title 

V of the Gramm-Leach-Bliley Act 

(‘‘GLBA’’), which include the 

requirement that at the time of 

establishing a customer relationship 

with a consumer and not less than 

annually during the continuation of 

such relationship, a financial institution 

shall provide a clear and conspicuous 

disclosure to such consumer of such 

financial institution’s policies and 

practices with respect to disclosing 

nonpublic personal information to 

affiliates and nonaffiliated third parties 

(‘‘privacy notice’’). Title V of the GLBA 

also provides that, unless an exception 

applies, a financial institution may not 

disclose nonpublic personal information 

of a consumer to a nonaffiliated third 

party unless the financial institution 

clearly and conspicuously discloses to 

the consumer that such information may 

be disclosed to such third party; the 

consumer is given the opportunity, 

before the time that such information is 

initially disclosed, to direct that such 

information not be disclosed to such 

third party; and the consumer is given 

an explanation of how the consumer can 

exercise that nondisclosure option (‘‘opt 

out notice’’). The Rule applies to brokerdealers, investment advisers registered 

with the Commission, and investment 

companies (‘‘covered entities’’). 

Commission staff estimates that, as of 

March 31, 2018, the Rule’s information 

collection burden applies to 

approximately 20,465 covered entities 

(approximately 3,857 broker-dealers, 

12,643 investment advisers registered 

with the Commission, and 3,965 

investment companies). In view of (a) 

the minimal recordkeeping burden 

imposed by the Rule (since the Rule has 

no recordkeeping requirement and 

records relating to customer 

communications already must be made 

and retained pursuant to other SEC 

rules); (b) the summary fashion in 

which information must be provided to 

customers in the privacy and opt out 

notices required by the Rule (the model 

privacy form adopted by the SEC and 

the other agencies in 2009, designed to 

serve as both a privacy notice and an 

opt out notice, is only two pages); (c) the 

availability to covered entities of the 

model privacy form and online model 

privacy form builder; and (d) the 

experience of covered entities’ staff with 

the notices, SEC staff estimates that 

covered entities will each spend an 

average of approximately 12 hours per 

year complying with the Rule, for a total 

of approximately 245,580 annual 

burden-hours (12 x 20,465 = 245,580). 

SEC staff understands that the vast 

majority of covered entities deliver their 

privacy and opt out notices with other 

communications such as account 

opening documents and account 

statements. Because the other 

communications are already delivered 

to consumers, adding a brief privacy 

and opt out notice should not result in 

added costs for processing or for postage 

and materials. Also, privacy and opt out 

notices may be delivered electronically 

to consumers who have agreed to 

electronic communications, which 

further reduces the costs of delivery. 

Because SEC staff assumes that most 

paper copies of privacy and opt out 

notices are combined with other 

required mailings, the burden-hour 

estimates above are based on resources 

required to integrate the privacy and opt 

notices into another mailing, rather than 

on the resources required to create and 

send a separate mailing. SEC staff 

estimates that, of the estimated 12 


daltland on DSKBBV9HB2PROD with NOTICES