[Federal Register Volume 74, Number 49 (Monday, March 16, 2009)]
[Notices]
[Pages 11162-11167]
From the Federal Register Online via the Government Publishing Office [www.gpo.gov]
[FR Doc No: E9-5570]


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SECURITIES AND EXCHANGE COMMISSION

[Release No. 34-59544; File No. SR-NYSE-2008-131]


Self-Regulatory Organizations; New York Stock Exchange, LLC; 
Order Approving Proposed Rule Change To Introduce a NYSE OpenBook 
Nonprofessional Subscriber Fee and To Revise the Unit of Count That 
Determines the Device Fees Payable by Data Recipients

March 9, 2009.

I. Introduction

    On December 18, 2008, the New York Stock Exchange, LLC (``NYSE'' or 
the ``Exchange'') filed with the Securities and Exchange Commission 
(``Commission''), pursuant to Section 19(b)(1) of the Securities 
Exchange Act of 1934 (``Act'') \1\ and Rule 19b-4 thereunder,\2\ a 
proposed rule change to introduce a nonprofessional subscriber fee for 
its NYSE OpenBook product offerings and to revise the unit of count 
that determines the device fees payable by data recipients. The 
proposed rule change was published for comment in the Federal Register 
on January 12, 2009.\3\ The Commission received two comment letters on 
the proposal.\4\ NYSE responded to the comment letters on February 25, 
2009.\5\ This order approves the proposed rule change.
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    \1\ 15 U.S.C. 78s(b)(1).
    \2\ 17 CFR 240.19b-4.
    \3\ See Securities Exchange Act Release No. 59198 (January 5, 
2009), 74 FR 1268.
    \4\ See February 2, 2009 letter from Ira D. Hammerman, Senior 
Managing Director and General Counsel, Securities Industry and 
Financial Markets Association (``SIFMA''), to Elizabeth M. Murphy, 
Secretary, Commission (``SIFMA Letter''); February 2, 2009 letter 
from Jeffrey T. Brown, Senior Vice President, Charles Schwab 
Corporation (``Schwab''), to Florence Harmon, Deputy Secretary, 
Commission, (``Schwab Letter'').
    \5\ See February 25, 2009 letter from Janet M. Kissane, Senior 
Vice President--Legal & Corporate Secretary, Office of the General 
Counsel, NYSE, to Elizabeth M. Murphy, Secretary, Commission (``NYSE 
Letter'').
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II. Description of the Proposal

A. Unit of Count

    As part of a one-year pilot and a wider initiative to simplify and 
modernize market data administration, the Exchange proposes to redefine 
some of the basic ``units of measure'' that Vendors are required to 
report to the Exchange and on which the Exchange bases its fees for its 
NYSE OpenBook product packages. NYSE believes the proposal is designed 
to be more closely aligned with current data consumption, reduce costs 
for the Exchange's customers, and potentially serve as a model for 
additional pricing efficiencies.
    NYSE OpenBook is a packaged suite of data feed products. It 
includes: (i) NYSE OpenBook Realtime, by which the Exchange makes NYSE 
OpenBook Realtime available on a snapshot basis, with updates 
distributed in real-time at intervals of one second; and (ii) NYSE 
OpenBook Ultra, by which the Exchange updates NYSE OpenBook information 
upon receipt of each displayed limit order, or upon an event that 
removes limit orders from NYSE OpenBook (i.e., cancellation or 
execution). For no additional charge, the Exchange makes available to 
recipients of NYSE OpenBook additional data feeds containing: (i) NYSE 
BestQuote,\6\ which allows customers to see NYSE's best bid and offer 
as made available through the Consolidated Quotation System, and which 
may contain additional market interest that is not displayed in the

[[Page 11163]]

NYSE limit order book and that, therefore, is not available in NYSE 
OpenBook; and (ii) Order Imbalance Information, which includes 
information regarding order imbalances prior to the market opening and 
closing auctions.
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    \6\ NYSE added NYSE BestQuote to the NYSE OpenBook Realtime 
package in October 2006. See Securities Exchange Act Release No. 
54594 (October 12, 2006); 71 FR 61819 (October 19, 2006) (SR-NYSE-
2006-81).
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    Currently, an end-user of NYSE OpenBook pays (or its Vendor pays on 
its behalf) the monthly per-terminal NYSE OpenBook device fee of $60. 
In addition, a NYSE OpenBook data feed recipient pays a monthly $5,000 
access fee for NYSE OpenBook, plus the per-terminal fee if the data 
feed recipient also displays the data. These fees currently apply 
regardless of whether the recipient receives NYSE OpenBook Realtime or 
NYSE OpenBook Ultra and whether the subscriber is a professional 
subscriber or a nonprofessional subscriber. The recipients receive NYSE 
Order Imbalance Information and NYSE BestQuote for no additional 
charge.
    Under the proposal, the Exchange will no longer define the Vendor-
Subscriber relationship based on the manner in which a Data Feed 
Recipient or Subscriber receives data (i.e., through controlled 
displays or through data feeds). Instead, the Exchange proposes to 
adopt more objective billing criteria. The following basic principles 
underlie this proposal.
i. Vendors
    <bullet> ``Vendors'' are market data vendors, broker-dealers, 
private network providers and other entities that control Subscribers' 
access to data through Subscriber Entitlement Controls.
ii. Subscribers
    <bullet> ``Subscribers'' are unique individual persons or devices 
to which a Vendor provides data. Any individual or device that receives 
data from a Vendor is a Subscriber, whether the individual or device 
works for or belongs to the Vendor, or works for or belongs to an 
entity other than the Vendor.
    <bullet> Only a Vendor may control Subscriber access to data.
    <bullet> Subscribers may not redistribute data in any manner.
iii. Subscriber Entitlements
    <bullet> A Subscriber Entitlement is a Vendor's permitting a 
Subscriber to receive access to data through an Exchange-approved 
Subscriber Entitlement Control.
    <bullet> A Vendor may not provide data access to a Subscriber 
except through a unique Subscriber Entitlement.
    <bullet> The Exchange will require each Vendor to provide a unique 
Subscriber Entitlement to each unique Subscriber.
    <bullet> At prescribed intervals (normally monthly), the Exchange 
will require each Vendor to report each unique Subscriber Entitlement.
iv. Subscriber Entitlement Controls
    <bullet> A Subscriber Entitlement Control is the Vendor's process 
of permitting Subscribers' access to data.
    <bullet> Prior to using any Subscriber Entitlement Control or 
changing a previously approved Subscriber Entitlement Control, a Vendor 
must provide the Exchange with a demonstration and a detailed written 
description of the control or change and the Exchange must have 
approved it in writing.
    <bullet> The Exchange will approve a Subscriber Entitlement Control 
if it allows only authorized, unique end-users or devices to access 
data or monitors access to data by each unique end-user or device.
    <bullet> Vendors must design Subscriber Entitlement Controls to 
produce an audit report and make each audit report available to the 
Exchange upon request. The audit report must identify:
    A. Each entitlement update to the Subscriber Entitlement Control;
    B. The status of the Subscriber Entitlement Control; and
    C. Any other changes to the Subscriber Entitlement Control over a 
given period.
    <bullet> Only the Vendor may have access to Subscriber Entitlement 
Controls.
    The Exchange recognizes that each Vendor and Subscriber may use 
NYSE OpenBook data differently and that the Exchange is one of many 
markets with whom Vendors and Subscribers may enter into arrangements 
for the receipt and use of data. Accordingly, the Exchange does not 
propose to restrict how Vendors may use NYSE OpenBook data in their 
display services and encourages Vendors to create and promote 
innovative uses of NYSE OpenBook information. For instance, a Vendor 
may use NYSE OpenBook data to create derived information displays, such 
as displays that aggregate NYSE OpenBook data with data from other 
markets.\7\ The proposal does not discriminate among data recipients 
and users, as the new ``unit of measure'' concepts would apply equally 
to everyone.
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    \7\ In the case of derived displays, the Vendor is required to: 
(1) Pay the Exchange's device fees (described below); (2) include 
derived displays in its reports of NYSE OpenBook usage; and (3) use 
reasonable efforts to assure that any person viewing a display of 
derived data understands what the display represents and the manner 
in which it was derived.
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    Under the proposed rule change, the Exchange would require Vendors 
to count every Subscriber Entitlement, whether it be an individual 
person or a device. Thus, the Vendor would have to include in the count 
every person and device that has access to the data, regardless of the 
purposes for which the individual or device uses the data. The proposal 
eliminates current exceptions to the device-reporting obligation in 
order to subject the count to a more objective process and simplify the 
reporting obligation for Vendors. For instance, the Exchange previously 
has not required Vendors to report certain programmers and other 
individuals who receive access to data for certain specific, non-
trading purposes. These exceptions require the Exchange to monitor the 
manner end-users consume data, which in turn adds cost for both the 
Exchange and customers.
    To simplify the process, the Exchange will require Vendors to 
report all entitlements in accordance with the following:
    i. In connection with a Vendor's external distribution of NYSE 
OpenBook data, the Vendor should count as one Subscriber Entitlement 
each unique Subscriber that the Vendor has entitled to have access to 
the Exchange's market data. However, where a device is dedicated 
specifically to a single individual, the Vendor should count only the 
individual and need not count the device.
    ii. In connection with a Vendor's internal distribution of NYSE 
OpenBook data, the Vendor should count as one Subscriber Entitlement 
each unique individual (but not devices) that the Vendor has entitled 
to have access to the Exchange's market data.
    iii. The Vendor should identify and report each unique Subscriber. 
If a Subscriber uses the same unique Subscriber Entitlement to gain 
access to multiple market data services, the Vendor should count that 
as one Subscriber Entitlement. However, if a unique Subscriber uses 
multiple Subscriber Entitlements to gain access to one or more market 
data services (e.g., a single Subscriber has multiple passwords and 
user identifications), the Vendor should report all of those Subscriber 
Entitlements.
    iv. Vendors should report each unique individual person who 
receives access through multiple devices as one Subscriber Entitlement 
so long as each device is dedicated specifically to that individual.
    v. The Vendor should include in the count as one Subscriber 
Entitlement devices serving no entitled individuals. However, if the 
Vendor entitles one or more individuals to use the same device, the 
Vendor should include only

[[Page 11164]]

the entitled individuals, and not the device, in the count.

B. Nonprofessional Subscriber Fee and Fee Cap

    In addition to the unit of count one-year pilot program, the 
Exchange also proposes to establish a fee applicable to the receipt and 
use of NYSE OpenBook data by nonprofessional Subscribers. Currently, 
the Exchange does not have a separate fee for the receipt of NYSE 
OpenBook data by nonprofessional Subscribers. Under the present 
structure, NYSE OpenBook subscribers pay a device fee of $60. In the 
instant proposal, the Exchange would reduce the NYSE OpenBook device 
fee to $15 per month for investors who qualify as nonprofessional 
Subscribers; the fee would be imposed on the Vendor, rather than on the 
nonprofessional Subscriber.
    In establishing a reduced rate for nonprofessional Subscribers, the 
Exchange proposes to apply the same criteria for qualification as a 
``nonprofessional subscriber'' as the CTA and CQ Plan Participants 
use.\8\ Individuals that qualify as nonprofessional subscribers would 
be eligible to enjoy the lower nonprofessional subscriber rate 
regardless of whether they receive the NYSE OpenBook service from a 
Vendor that receives the NYSE OpenBook datafeed directly from the 
Exchange, or from a Vendor that receives the database indirectly 
through an intermediary.
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    \8\ Like the CTA and CQ Plans, classification as a 
nonprofessional subscriber is subject to Exchange review and 
requires the subscriber to attest to his or her nonprofessional 
subscriber status. A ``nonprofessional subscriber'' is a natural 
person who uses the data solely for his personal, non-business use 
and who is neither (i) registered or qualified with the SEC, the 
Commodities Futures Trading Commission, any state securities agency, 
any securities exchange or association, or any commodities or 
futures contract market or association, (ii) engaged as an 
``investment adviser'' as that term is defined in Section 202(a)(11) 
of the Investment Advisors Act of 1940 (whether or not registered or 
qualified under that act), nor (iii) employed by a bank or other 
organization exemption 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 
function for an organization not so exempt.
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    The Exchange proposes to introduce a monthly maximum amount (the 
``Maximum Amount'') that a broker-dealer would have to pay to provide 
NYSE OpenBook Realtime or NYSE OpenBook Ultra to any number of 
nonprofessional Subscribers if such Subscriber maintains a brokerage 
account with the broker-dealer. The broker-dealer must be registered as 
a broker/dealer under the Act.
    The Exchange proposes to set the Maximum Amount at $25,000 per 
month for each calendar year subject to an increase or decrease by the 
percentage increase or decrease in the annual cost-of-living adjustment 
(``COLA'') that the U.S. Social Security Administration applies to 
Supplemental Security Income for the calendar year preceding that 
subsequent calendar year. For example, if the COLA for calendar year 
2008 is a two percent increase, then the monthly Maximum Amount for 
months falling in calendar year 2009 would increase by two percent to 
$25,500.
    The Exchange believes that the maximum monthly payment will benefit 
broker-dealers that service a large customer base in particular. Under 
the proposal, these broker-dealers would have to have procedures in 
place that enable them to: (i) Procure readily the nonprofessional 
subscriber attestation from each nonprofessional customer, a 
requirement that is a prerequisite for qualification as a 
nonprofessional subscriber; and (ii) review periodically the accounts 
included under their nonprofessional cap to ensure their 
nonprofessional status. Recognizing that these broker-dealers may have 
a small number of account-holding customers that technically do not 
qualify for the nonprofessional Subscriber fee, but whom a broker-
dealer may inadvertently include under the cap because of the 
complexities of managing thousands or even millions of accounts, the 
Exchange proposes guidelines under which the broker-dealer will not be 
penalized for using the nonprofessional Subscriber fee cap 
notwithstanding the inclusion of a limited number of account-holding 
professional Subscribers.
    Specifically, a broker-dealer may include professional Subscribers 
in the calculation of the monthly maximum amount if:
    i. Nonprofessional Subscribers comprise no less than 95 percent of 
the pool of Subscribers that are included in the calculation;
    ii. Each professional Subscriber included in the calculation 
maintains an active brokerage account directly with the broker-dealer 
(that is, with the broker-dealer rather than with a correspondent firm 
of the broker-dealer); and
    iii. Each professional Subscriber that is included in the 
calculation is not affiliated with the broker-dealer or any of its 
affiliates.\9\
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    \9\ A professional Subscriber is ``affiliated'' with a broker-
dealer if he or she is an officer, partner, member, or employee of 
the broker dealer or an affiliate of the broker-dealer or enjoys a 
similar status with the broker-dealer or affiliate.
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    iv. All Subscribers receive access to the identical service, 
regardless of whether the Subscribers are professional Subscribers or 
nonprofessional Subscribers.
    v. Upon discovery of the inclusion in the cap of an individual that 
does not qualify as a nonprofessional Subscriber, the broker-dealer 
takes reasonable action to reclassify and report that individual as a 
professional Subscriber during the immediately following reporting 
period.
    Notwithstanding clauses (iii) and (v), the broker-dealer may 
include a professional Subscriber that is affiliated with the broker-
dealer or its affiliates (subject to clauses (i) and (ii)) if he or she 
accesses market data on-line through his or her personal account solely 
for the non-business purpose of managing his or her own portfolio. 
Notwithstanding clause (v), professional Subscribers may constitute up 
to five percent of the pool of Subscribers that the broker-dealer 
includes in the calculation of the monthly maximum amount if those 
professional Subscribers can only view data derived from NYSE OpenBook 
Ultra through the Subscriber's online brokerage account; and in an 
inquiry/response per-quote display (i.e., not in a streaming display).
    The Exchange proposes this exception to permit broker-dealers that 
primarily serve non-institutional brokerage account holders to offer a 
consistent online client experience without undue administrative 
burdens but guard against potential abuses by monitoring the use of the 
exception closely and reserving the right to deny application of this 
exception if a broker-dealer is determined to be misusing it, such as 
by opening up retail brokerage accounts to disseminate data to 
institutional clients. The Exchange intends for the Maximum Amount to 
enable much wider distribution of NYSE OpenBook data to retail 
investors holding brokerage accounts and further the goal of market 
transparency for investors. If the $15 per-device fee would allow a 
broker-dealer to pay less than the Maximum Amount for any month, the 
broker-dealer may pay the lower amount for that month.

III. Summary of Comments and NYSE Response

    The Commission received two comments on the proposed rule change. 
In general, the commenters supported the proposed changes to the market 
data fee structure. NYSE responded to the comments.
    SIFMA supports several aspects of the proposed rule change. In 
particular, SIFMA believes that the unit of count

[[Page 11165]]

pilot holds the promise of simplified and fairer market date fee 
administration that would avoid duplicate counting of an individual 
using multiple devices.\10\ In addition, SIFMA supports the 
nonprofessional subscriber fee and fee cap.
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    \10\ SIFMA Letter at 2.
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    Schwab supports NYSE's proposal to introduce nonprofessional fees 
and fee cap for nonprofessional recipients of the NYSE's OpenBook 
product. Schwab believes that the proposal should for the first time 
allow retail customers to obtain affordable depth-of-book market 
data.\11\ Schwab notes that before this proposal, NYSE OpenBook would 
have cost $60 million a month to distribute across the firm. The 
proposal would limit the charges to $25,000 per month for Schwab to 
distribute NYSE OpenBook to its nonprofessional clients. In addition, 
Schwab commented that NYSE's changes in the way users of data are 
counted will make the market data billing process more efficient and 
less burdensome.\12\
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    \11\ Schwab Letter at 1.
    \12\ Schwab Letter at 2.
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    The commenters noted their objection to the Commission's approach 
for reviewing and evaluating market data proposals. SIFMA and Schwab 
objected to the application of the test set forth in the NYSE Arca 
Order for determining whether specific market data fee proposals are 
consistent with the Exchange Act.\13\ SIFMA also stated that NYSE 
``erroneously applies'' the competitive factors test enumerated in the 
NYSE Arca Order.\14\
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    \13\ SIFMA Letter at 1 and Schwab Letter at 2. SIFMA continues 
to object for the reasons set forth in prior SIFMA comment letters. 
See January 17, 2007 letter from Ira D. Hammerman, Senior Managing 
Director and General Counsel, SIFMA to Nancy M. Morris, Secretary, 
Commission; August 1, 2007 letter from Ira D. Hammerman, Senior 
Managing Director and General Counsel, SIFMA, to Nancy M. Morris, 
Secretary, Commission; August 16, 2007 letter from Marc E. Lackritz, 
President and CEO, SIFMA, to Nancy M. Morris, Secretary, Commission; 
November 7, 2007 letter from Melissa MacGregor, Vice President & 
Assistant General Counsel, SIFMA, to Dr. Erik R. Sirri, Director, 
Division of Market Regulation, Commission; February 7, 2008 letter 
from Ira D. Hammerman, Senior Managing Director and General Counsel, 
SIFMA, to Nancy M. Morris, Secretary, Commission; February 14, 2008 
letter from Christopher Gilkerson and Gregory Babyak, Market Data 
Subcommittee Co-Chairs to Nancy M. Morris, Secretary, Commission; 
July 10, 2008 letter from Ira D. Hammerman, Senior Managing Director 
and General Counsel, SIFMA to Florence Harmon, Deputy Secretary, 
Commission; November 17, 2008 letter from Ira D. Hammerman, Senior 
Managing Director and General Counsel, SIFMA to Florence Harmon, 
Deputy Secretary, Commission.
    \14\ SIFMA Letter at 3.
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    NYSE appreciated SIFMA's and Schwab's strong support and positive 
feedback regarding the nonprofessional subscriber fee and the changes 
to the unit of count policies. In addition, the Exchange clarified that 
it intended to file a proposed rule change with the Commission to amend 
the pilot program to retroactively cap the fees payable by a vendor in 
respect of the use of data for administrative purposes to $1500 per 
month. The Exchange also clarified the terms and conditions applicable 
to the NYSE Open Book Ultra ``five percent'' exception. Finally, NYSE 
addressed SIFMA's disagreement with Commission's application of the 
NYSE Arca Order approach. In this regard, NYSE noted that the SIFMA 
letter did not provide a basis for its claim that the Exchange failed 
to comply with the competitive forces test set forth in the NYSE Arca 
Order. In addition, the Exchange noted its substantive analysis of the 
application of the test to this proposal. The Exchange also reasserted 
that it is subject to significant competitive forces and this proposal, 
which reduces fees, is in part a response to such competition.

IV. Discussion

    The Commission has reviewed carefully the proposed rule change, the 
comment letters, and NYSE's response to the comment letters, and finds 
that the proposed rule change is consistent with the requirements of 
the Act and the rules and regulations thereunder applicable to a 
national securities exchange. In particular, it is consistent with 
Section 6(b)(4) of the Act,\15\ which requires that the rules of a 
national securities exchange provide for the equitable allocation of 
reasonable dues, fees, and other charges among its members and issuers 
and other parties using its facilities, and Section 6(b)(5) of the 
Act,\16\ which requires, among other things, that the rules of a 
national securities exchange be designed to promote just and equitable 
principles of trade, to remove impediments to and perfect the mechanism 
of a free and open market and a national market system and, in general, 
to protect investors and the public interest, and not be designed to 
permit unfair discrimination between customers, issuers, brokers, or 
dealers.
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    \15\ 15 U.S.C. 78f(b)(4).
    \16\ 15 U.S.C. 78f(b)(5).
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    The Commission also finds that the proposed rule change is 
consistent with the provisions of Section 6(b)(8) of the Act,\17\ which 
requires that the rules of an exchange not impose any burden on 
competition not necessary or appropriate in furtherance of the purposes 
of the Act. Finally, the Commission finds that the proposed rule change 
is consistent with Rule 603(a) of Regulation NMS,\18\ adopted under 
Section 11A(c)(1) of the Act, which requires an exclusive processor 
that distributes information with respect to quotations for or 
transactions in an NMS stock to do so on terms that are fair and 
reasonable and that are not unreasonably discriminatory.\19\
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    \17\ 15 U.S.C. 78f(b)(8).
    \18\ 17 CFR 242.603(a).
    \19\ NYSE is an exclusive processor of NYSE depth-of-book data 
under Section 3(a)(22)(B) of the Act, 15 U.S.C. 78c(a)(22)(B), which 
defines an exclusive processor as, among other things, an exchange 
that distributes information with respect to quotations or 
transactions on an exclusive basis on its own behalf.
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    The Commission has reviewed the proposal using the approach set 
forth in the NYSE Arca Order for non-core market data fees.\20\ In the 
NYSE Arca Order, the Commission stated that ``when possible, reliance 
on competitive forces is the most appropriate and effective means to 
assess whether the terms for the distribution of non-core data are 
equitable, fair and reasonable, and not unreasonably discriminatory.'' 
\21\ It noted that 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.'' \22\ If an exchange ``was subject to 
significant competitive forces in setting the terms of a proposal,'' 
the Commission will approve a proposal unless it determines that 
``there is a substantial countervailing basis to find that the terms 
nevertheless fail to meet an applicable requirement of the Exchange Act 
or the rules thereunder.'' \23\
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    \20\ Securities Exchange Act Release No. 59039 (December 2, 
2008), 73 FR 74770 (December 9, 2008) (SR-NYSEArca-2006-21) (``NYSE 
Arca Order''). In the NYSE Arca Order, the Commission describes in 
great detail the competitive factors that apply to non-core market 
data products. The Commission hereby incorporates by reference the 
data and analysis from the NYSE Arca Order into this order.
    \21\ Id. at 74771.
    \22\ Id. at 74782.
    \23\ Id. at 74781.
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    As noted in the NYSE Arca Order, the standards in Section 6 of the 
Act and Rule 603 of Regulation NMS do not differentiate between types 
of data and therefore apply to exchange proposals to distribute both 
core data and non-core data. Core data is the best-priced quotations 
and comprehensive last-sale reports of all markets that the Commission, 
pursuant to Rule 603(b), requires a central processor to consolidate 
and distribute to the public pursuant to joint-SRO plans.\24\ In

[[Page 11166]]

contrast, individual exchanges and other market participants distribute 
non-core data voluntarily.\25\ The mandatory nature of the core data 
disclosure regime leaves little room for competitive forces to 
determine products and fees.\26\ Non-core data products and their fees 
are, by contrast, much more sensitive to competitive forces. The 
Commission therefore is able to use competitive forces in its 
determination of whether an exchange's proposal to distribute non-core 
data meets the standards of Section 6 and Rule 603.\27\ Because NYSE's 
instant proposal relates to the distribution of non-core data, the 
Commission will apply the market-based approach set forth in the NYSE 
Arca Order.
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    \24\ See 17 CFR 242.603(b). (``Every national securities 
exchange on which an NMS stock is traded and national securities 
association shall act jointly pursuant to one or more effective 
national market system plans to disseminate consolidated 
information, including a national best bid and national best offer, 
on quotations for and transactions in NMS stocks. Such plan or plans 
shall provide for the dissemination of all consolidated information 
for an individual NMS stock through a single plan processor.'').
    \25\ See NYSE Arca Order at 74779.
    \26\ Id.
    \27\ Id.
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    The Exchange proposes to modify the manner that it imposes fees for 
the NYSE OpenBook product packages. The proposal rule change would 
simplify the way the Exchange charges for NYSE OpenBook by changing the 
methodology for the Unit of Count. It also would introduce a 
nonprofessional Subscriber fee, as well as the Maximum Amount a broker-
dealer would have to pay for nonprofessional Subscribers. Collectively, 
these changes should reduce the fees and administrative costs related 
to the receipt and distribution of NYSE OpenBook packages.
    The proposal before the Commission relates to fees for NYSE 
OpenBook products which are non-core, depth of book market data 
products, and as in the Commission's NYSE Arca Order analysis at least 
two broad types of significant competitive forces applied to NYSE in 
setting the terms of this proposal: (i) NYSE's compelling need to 
attract order flow from market participants; and (ii) the availability 
to market participants of alternatives to purchasing NYSE's depth-of-
book order data.
    Attracting order flow is the core competitive concern of any equity 
exchange, including NYSE. Attracting order flow is an essential part of 
an NYSE's competitive success. If NYSE cannot attract order flow to its 
market, it will not be able to execute transactions. If NYSE cannot 
execute transactions on its market, it will not generate transaction 
revenue. If NYSE cannot attract orders or execute transactions on its 
market, it will not have market data to distribute, for a fee or 
otherwise, and will not earn market data revenue and thus not be 
competitive with other exchanges that have this ability. Table 1 below 
provides a useful recent snapshot of the state of competition in the 
U.S. equity markets in the month of January 2009: \28\
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    \28\ Source: ArcaVision (available at http://www.arcavision.com).

                    Table 1--Reported Share Volume in U.S-Listed Equities During January 2009
                                                       [%]
----------------------------------------------------------------------------------------------------------------
                          Trading venue                             All stocks     NYSE- listed   NASDAQ- listed
----------------------------------------------------------------------------------------------------------------
NASDAQ..........................................................            27.1            20.5            39.9
All Non-Exchange................................................            26.7            26.2            31.0
NYSE Arca.......................................................            17.9            15.7            15.8
NYSE............................................................            14.8            26.2             0.0
BATS............................................................            10.7             9.0            10.8
International Stock Exchange....................................             1.3             1.4             1.4
National Stock Exchange.........................................             0.6             0.7             0.7
Chicago Stock Exchange..........................................             0.4             0.4             0.3
CBOE Stock Exchange.............................................             0.2             0.0             0.1
NYSE Alternext..................................................             0.1             0.0             0.0
NASDAQ OMX BX...................................................             0.0             0.0             0.0
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    The market share percentages in Table 1 strongly indicate that NYSE 
must compete vigorously for order flow to maintain its share of trading 
volume. This compelling need to attract order flow imposes significant 
pressure on NYSE to act reasonably in setting its fees for NYSE market 
data, particularly given that the market participants that must pay 
such fees often will be the same market participants from whom NYSE 
must attract order flow. These market participants particularly include 
the large broker-dealer firms that control the handling of a large 
volume of customer and proprietary order flow. Given the portability of 
order flow from one trading venue to another, any exchange that sought 
to charge unreasonably high data fees would risk alienating many of the 
same customers on whose orders it depends for competitive survival.\29\
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    \29\ See NYSE Arca Order at 74783.
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    In addition to the need to attract order flow, the availability of 
alternatives to NYSE's OpenBook data significantly affect the terms on 
which NYSE can distribute this market data.\30\ In setting the fees for 
its NYSE OpenBook data, NYSE must consider the extent to which market 
participants would choose one or more alternatives instead of 
purchasing the exchange's data.\31\ Of course, the most basic source of 
information generally available at an exchange is the complete record 
of an exchange's transactions that is provided in the core data 
feeds.\32\ In this respect, the core data feeds that include an 
exchange's own transaction information

[[Page 11167]]

are a significant alternative to the exchange's market data 
product.\33\
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    \30\ See Richard Posner, Economic Analysis of Law Sec.  9.1 (5th 
ed. 1998) (discussing the theory of monopolies and pricing). See 
also U.S. Dep't of Justice & Fed'l Trade Comm'n, Horizontal Merger 
Guidelines Sec.  1.11 (1992), as revised (1997) (explaining the 
importance of alternatives to the presence of competition and the 
definition of markets and market power). Courts frequently refer to 
the Department of Justice and Federal Trade Commission merger 
guidelines to define product markets and evaluate market power. See, 
e.g., FTC v. Whole Foods Market, Inc., 502 F. Supp. 2d 1 (D.D.C. 
2007); FTC v. Arch Coal, Inc., 329 F. Supp. 2d 109 (D.D.C. 2004). In 
considering antitrust issues, courts have recognized the value of 
competition in producing lower prices. See, e.g., Leegin Creative 
Leather Products v. PSKS, Inc., 127 S. Ct. 2705 (2007); Atlanta 
Richfield Co. v. United States Petroleum Co., 495 U.S. 328 (1990); 
Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574 
(1986); State Oil Co. v. Khan, 522 U.S. 3 (1997); Northern Pacific 
Railway Co. v. U.S., 356 U.S. 1 (1958).
    \31\ See NYSE Arca Order at 74783.
    \32\ Id.
    \33\ Id.
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    For more specific information concerning depth, market participants 
can choose among products offered by the various exchanges and 
ECNs.\34\ The various self-regulatory organizations, the several Trade 
Reporting Facilities of FINRA, and ECNs that produce proprietary data 
are all sources of competition. In addition, market participants can 
assess depth with tools other than market data, such as ``pinging'' 
orders that search out both displayed and nondisplayed size at all 
price points within an order's limit price.\35\
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    \34\ See NYSE Arca Order at 74784.
    \35\ Id.
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    In sum, there are a variety of alternative sources of information 
that impose significant competitive pressures on the NYSE in setting 
the terms for distributing its depth-of-book order data. The Commission 
believes that the availability of those alternatives, as well as the 
NYSE's compelling need to attract order flow, imposed significant 
competitive pressure on the NYSE to act equitably, fairly, and 
reasonably in setting the terms of its proposal.
    Because the NYSE was subject to significant competitive forces in 
setting the terms of the proposal, the Commission will approve the 
proposal in the absence of a substantial countervailing basis to find 
that its terms nevertheless fail to meet an applicable requirement of 
the Act or the rules thereunder. Neither commenter raised concerns with 
regard to a substantial countervailing basis that the terms of the 
proposal failed to meet the requirements of the Act or the rules 
thereunder. Further, an analysis of the proposal does not provide such 
a basis.
    The Exchange proposes to switch from a per-device fee to a 
Subscriber Entitlement fee. The Exchange is also proposing to introduce 
a nonprofessional Subscriber Fee that is subject to a monthly maximum 
amount. This change will lower the fees payable for NYSE OpenBook data 
for nonprofessional Subscribers from $60 per month to $15 per month per 
individual and device. The commenters supported NYSE's changes to its 
market data fee structure. SIFMA believes that the unit of count pilot 
holds the promise of simplified and fairer market date fee 
administration that would avoid duplicate counting of an individual 
using multiple devices.\36\ Schwab stated that the changes in how users 
are of data are counted will make the market data billing process more 
efficient and reduce administrative burdens.\37\ Schwab stated that the 
proposal would for the first-time allow retail customers obtain 
affordable depth-of-book market data.\38\ The Commission believes that 
this proposed rule change will provide vendors with the flexibility to 
manage NYSE market data in a manner that they determine is most useful 
and efficient to their business operations.\39\ In addition, the 
overall reduction in costs for NYSE OpenBook could lead to a wider 
distribution of the market data and greater market transparency.\40\
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    \36\ SIFMA Letter at 2.
    \37\ Schwab Letter at 2.
    \38\ Schwab Letter at 1.
    \39\ See Schwab Letter at 2 (``[T]he proposal will allow 
[Vendors] to manipulate the data as we choose and to aggregate this 
data with data from other exchanges to offer innovative market data 
displays to our customers.'').
    \40\ See SIFMA Letter at 3 (``SIFMA has long advocated a 
nonprofessional fee for depth-of-book data to promote market 
transparency and investor protection'').
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V. Conclusion

    It is therefore ordered, pursuant to Section 19(b)(2) of the 
Act,\41\ that the proposed rule change (SR-NYSE-2008-131) be, and 
hereby is, approved.
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    \41\ 15 U.S.C. 78s(b)(2).

    For the Commission, by the Division of Trading and Markets, 
pursuant to delegated authority.\42\
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    \42\ 17 CFR 200.30-3(a)(12).
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Florence E. Harmon,
Deputy Secretary.
 [FR Doc. E9-5570 Filed 3-13-09; 8:45 am]
BILLING CODE 8011-01-P