Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / Notices 40591 

12Applicants are not requesting and the staff is 

not providing any relief for transaction fees 

received in connection with any Co-Investment 

Transaction. 

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–BX–2018–031, available at http://

nasdaq.cchwallstreet.com/. It was subsequently 

refiled on July 17, 2018. See SR–BX–2018–034, 

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

Continued 

amount of the opportunity; then the 

amount invested by each such party will 

be allocated among them pro rata based 

on each party’s capital available for 

investment in the asset class being 

allocated, up to the amount proposed to 

be invested by each. 

(d) The acquisition of Follow-On 

Investments as permitted by this 

condition will be considered a CoInvestment Transaction for all purposes 

and subject to the other conditions set 

forth in the application. 

9. The Independent Trustees of each 

Regulated Fund will be provided 

quarterly for review all information 

concerning Potential Co-Investment 

Transactions and Co-Investment 

Transactions, including investments 

made by other Regulated Funds and the 

Affiliated Accounts that the Regulated 

Fund considered but declined to 

participate in, so that the Independent 

Trustees may determine whether all 

investments made during the preceding 

quarter, including those investments 

which the Regulated Fund considered 

but declined to participate in, comply 

with the conditions of the Order. In 

addition, the Independent Trustees will 

consider at least annually the continued 

appropriateness for the Regulated Fund 

of participating in new and existing CoInvestment Transactions. 

10. Each Regulated Fund will 

maintain the records required by section 

57(f)(3) of the Act as if each of the 

Regulated Funds were a business 

development company (as defined in 

section 2(a)(48) of the Act) and each of 

the investments permitted under these 

conditions were approved by the 

Required Majority under section 57(f) of 

the Act. 

11. No Independent Trustee of a 

Regulated Fund will also be a director, 

trustee, general partner, managing 

member or principal, or otherwise an 

‘‘affiliated person’’ (as defined in the 

Act), of an Affiliated Account. 

12. The expenses, if any, associated 

with acquiring, holding or disposing of 

any securities acquired in a CoInvestment Transaction (including, 

without limitation, the expenses of the 

distribution of any such securities 

registered for sale under the Securities 

Act of 1933) will, to the extent not 

payable by an Adviser under the 

investment advisory agreements with 

the Regulated Funds and the Affiliated 

Accounts be shared by the Affiliated 

Accounts and the Regulated Funds in 

proportion to the relative amounts of the 

securities held or to be acquired or 

disposed of, as the case may be. 

13. Any transaction fee 12 (including 

break-up or commitment fees but 

excluding broker’s fees contemplated by 

section 17(e) of the Act, as applicable), 

received in connection with a CoInvestment Transaction will be 

distributed to the participating 

Regulated Funds and Affiliated 

Accounts on a pro rata basis based on 

the amounts they invested or 

committed, as the case may be, in such 

Co-Investment Transaction. If any 

transaction fee is to be held by the 

Adviser pending consummation of the 

transaction, the fee will be deposited 

into an account maintained by the 

Adviser at a bank or banks having the 

qualifications prescribed in section 

26(a)(1) of the Act, and the account will 

earn a competitive rate of interest that 

will also be divided pro rata among the 

participating Regulated Funds and 

Affiliated Accounts based on the 

amounts they invest in such CoInvestment Transaction. None of the 

Affiliated Accounts, the Advisers, the 

other Regulated Funds or any affiliated 

person of the Regulated Funds or 

Affiliated Accounts will receive 

additional compensation or 

remuneration of any kind as a result of 

or in connection with a Co-Investment 

Transaction (other than (a) in the case 

of the Regulated Funds and the 

Affiliated Accounts, the pro rata 

transaction fees described above and 

fees or other compensation described in 

condition 2(c)(iii)(C); and (b) in the case 

of the Advisers, investment advisory 

fees paid in accordance with the 

agreements between the Advisers and 

the Regulated Funds or the Affiliated 

Accounts). 

14. The Proprietary Accounts will not 

be permitted to invest in a Potential CoInvestment Transaction except to the 

extent the demand from the Regulated 

Funds and the other Affiliated Accounts 

is less than the total investment 

opportunity. 

15. The Advisers will each maintain 

policies and procedures reasonably 

designed to ensure compliance with the 

foregoing conditions. These policies and 

procedures will require, among other 

things, that the applicable Adviser will 

be notified of all Potential CoInvestment Transactions that fall within 

a Regulated Fund’s then-current 

Objectives and Strategies and will be 

given sufficient information to make its 

independent determination and 

recommendations under conditions 1, 

2(a), 7 and 8. 

16. If the Holders own in the aggregate 

more than 25 percent of the Shares of 

a Regulated Fund, then the Holders will 

vote such Shares as directed by an 

independent third party when voting on 

(1) the election of trustees; (2) the 

removal of one or more trustees; or (3) 

all other matters under either the Act or 

applicable State law affecting the 

Board’s composition, size or manner of 

election. 

17. Each Regulated Fund’s chief 

compliance officer, as defined in Rule 

38a–1(a)(4) under the Act, will prepare 

an annual report for its Board each year 

that evaluates (and documents the basis 

of that evaluation) the Regulated Fund’s 

compliance with the terms and 

conditions of the application and the 

procedures established to achieve such 

compliance. 

For the Commission, by the Division of 

Investment Management, under delegated 

authority. 

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–17497 Filed 8–14–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83810; File No. SR–BX– 

2018–036] 

Self-Regulatory Organizations; Nasdaq 

BX, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Incorporate BX Rule 

7039 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 BX, Inc. (‘‘BX’’ 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


daltland on DSKBBV9HB2PROD with NOTICES
40592 Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / Notices 

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. 

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. BX Last 

Sale consists of two data feeds containing real-time 

last sale information for trades executed on the 

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

transaction reports for Nasdaq-listed securities. ‘‘BX 

Last Sale for NYSE/Amex’’ contains all such 

transaction reports for NYSE- and Amex-listed 

securities. 

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

Exchange, Nasdaq, and Nasdaq PSX. 

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 Rule 7039(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 Rule 7039(b)(3). 

10The Exchange also proposes a technical change 

to Rule 7039(b)(1) to reflect that BX administrative 

fees are charged on a monthly, rather than annual, 

basis. See Securities Exchange Act Release No. 

79667 (December 22, 2016), 81 FR 96152 (December 

29, 2016) (SR–BX–2016–071). 

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). 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to incorporate 

BX Rule 7039 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 text of the proposed rule change 

is available on the Exchange’s website at 

http://nasdaqbx.cchwallstreet.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 

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 

BX Rule 7039 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. 

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 BX Last 

Sale, PSX 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 BX 

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 BX Rule 7039 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, BX Last Sale and 

PSX Last Sale, a data consolidation fee 

for Internal or External Distributors, and 

any user fees for BX Last Sale or PSX 

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 BX 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 market data 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 


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Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / Notices 40593 

16For example, the Commission has permitted 

pricing discounts for market data under Nasdaq 

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’’). 

designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

As described above, the proposal to 

cover BX 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 

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 BX rule book is 

designed to incorporate BX Rule 7039 

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 BX rule 

book is designed to incorporate BX Rule 

7039 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 BX 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 BX 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 


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40594 Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / Notices 

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). 

products with joint costs. The decision 

whether and on which platform to post 

an order will depend on the attributes 

of the platform where the order can be 

posted, including the execution fees, 

data quality and price, and distribution 

of its data products. Without trade 

executions, exchange data products 

cannot exist. Moreover, data products 

are valuable to many end users only 

insofar as they provide information that 

end users expect will assist them or 

their customers in making trading 

decisions. 

The costs of producing market data 

include not only the costs of the data 

distribution infrastructure, but also the 

costs of designing, maintaining, and 

operating the exchange’s transaction 

execution platform, 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. 


daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 158 / Wednesday, August 15, 2018 / Notices 40595 

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

25 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3The term ‘‘MBBO’’ means the best bid or offer 

on the Exchange. See Exchange Rule 100. See also 

Exchange Rule 506(c)(2). 

4The term ‘‘Public Customer’’ means a person 

that is not a broker or dealer in securities. See 

Exchange Rule 100. 

5The term ‘‘Priority Customer’’ means a person 

or entity that (i) is not a broker or dealer in 

securities, and (ii) does not place more than 390 

orders in listed options per day on average during 

a calendar month for its own beneficial account(s). 

See Exchange Rule 100. 

6See Securities Exchange Act Release No. 69007 

(February 28, 2013), 78 FR 14617 (March 6, 2013) 

(SR–MIAX–2013–05). 

7See id. 

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 

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– 

BX–2018–036 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–BX–2018–036. 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–BX–2018–036 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. 2018–17491 Filed 8–14–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–83813; File No. SR–MIAX– 

2018–20] 

Self-Regulatory Organizations; Miami 

International Securities Exchange LLC; 

Notice of Filing and Immediate 

Effectiveness of a Proposed Rule 

Change To Amend Its Fee Schedule 

August 9, 2018. 

Pursuant to the provisions of 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 31, 2018, Miami International 

Securities Exchange LLC (‘‘MIAX 

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

Securities and Exchange Commission 

(‘‘Commission’’) a 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 filing a proposal to 

amend the MIAX Options Fee Schedule 

(the ‘‘Fee Schedule’’) to delete a fee 

waiver relating to certain market data 

feed products. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://www.miaxoptions.com/rulefilings, at MIAX’s principal office, 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 

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 amend its 

Fee Schedule to delete a fee waiver 

relating to certain market data feed 

products offered by the Exchange— 

namely, the Exchange’s Administrative 

Information Subscriber (‘‘AIS’’) market 

data feed, and the Exchange’s Top of 

Market (‘‘ToM’’) market data feed. 

The ToM market data feed includes 

data that is identical to the data sent to 

the processor for the Options Price 

Regulatory Authority (‘‘OPRA’’). ToM 

provides real-time updates of the MIAX 

Best Bid or Offer, or MBBO,3 price with 

aggregate orders and quote size of 

contracts that can be displayed, display 

of Public Customer 4 interest at the 

MBBO, display of Priority Customer 5

interest at the MBBO, and MIAX 

Options last sale.6 The Exchange 

launched ToM in early 2013,7 and 


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