11162 Federal Register / Vol. 74, No. 49 / Monday, March 16, 2009 / Notices 

21See Richard Posner, Economic Analysis of Law 

§ 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 § 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). 

22 15 U.S.C. 78s(b)(2). 

23 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

3See Securities Exchange Act Release No. 59198 

(January 5, 2009), 74 FR 1268. 

4See 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’’). 

5See 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’’). 

6NYSE 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). 

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. Specifically with 

respect to trading prior to the open and 

close, for example, the Commission 

notes that exchanges other than the 

NYSE currently offer, or could easily 

offer, trading services that compete with 

the NYSE open and close. 

In addition to the need to attract order 

flow, the availability of alternatives to 

NYSE’s Order Imbalance Information 

significantly affect the terms on which 

NYSE can distribute this market data.21

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. The various self-regulatory 

organizations, the several Trade 

Reporting Facilities of FINRA, and ECNs 

that produce proprietary data are all 

sources of competition. Accordingly, a 

variety of alternative sources of 

information impose significant 

competitive pressures on the NYSE in 

setting the terms for distributing its 

market 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. An analysis of the 

proposal does not provide such a basis, 

nor were there any comments on this 

filing, so no one raised any issues under 

this portion of the test. For example, the 

proposal does not unreasonably 

discriminate among types of users. The 

proposed fee entitles the datafeed 

recipient to make displays of the 

information available to an unlimited 

number of subscribers at no extra 

charge. 

V. Conclusion 

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,22 that the 

proposed rule change (SR–NYSE–2008– 

132) be, and hereby is, approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.23

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–5569 Filed 3–13–09; 8:45 am] 

BILLING CODE 8011–01–P 

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. 

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 

Federal Register / Vol. 74, No. 49 / Monday, March 16, 2009 / Notices 11163 

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. 

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. 

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 perterminal 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 

• ‘‘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 

• ‘‘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. 

• Only a Vendor may control 

Subscriber access to data. 

• Subscribers may not redistribute 

data in any manner. 

iii. Subscriber Entitlements 

• A Subscriber Entitlement is a 

Vendor’s permitting a Subscriber to 

receive access to data through an 

Exchange-approved Subscriber 

Entitlement Control. 

• A Vendor may not provide data 

access to a Subscriber except through a 

unique Subscriber Entitlement. 

• The Exchange will require each 

Vendor to provide a unique Subscriber 

Entitlement to each unique Subscriber. 

• At prescribed intervals (normally 

monthly), the Exchange will require 

each Vendor to report each unique 

Subscriber Entitlement. 

iv. Subscriber Entitlement Controls 

• A Subscriber Entitlement Control is 

the Vendor’s process of permitting 

Subscribers’ access to data. 

• 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. 

• The Exchange will approve a 

Subscriber Entitlement Control if it 

allows only authorized, unique endusers or devices to access data or 

monitors access to data by each unique 

end-user or device. 

• 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. 

• 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. 

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 

11164 Federal Register / Vol. 74, No. 49 / Monday, March 16, 2009 / Notices 

8Like 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, nonbusiness 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. 

9A 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. 

the entitled individuals, and not the 

device, in the count. 

B. Nonprofessional Subscriber Fee and 

Fee Cap 

In addition to the unit of count oneyear 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. 

The Exchange proposes to introduce a 

monthly maximum amount (the 

‘‘Maximum Amount’’) that a brokerdealer 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 brokerdealer); and 

iii. Each professional Subscriber that 

is included in the calculation is not 

affiliated with the broker-dealer or any 

of its affiliates.9

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 brokerdealer to pay less than the Maximum 

Amount for any month, the brokerdealer 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 

Federal Register / Vol. 74, No. 49 / Monday, March 16, 2009 / Notices 11165 

10SIFMA Letter at 2. 11Schwab Letter at 1. 12Schwab Letter at 2. 

13SIFMA 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. 

14SIFMA Letter at 3. 

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

16 15 U.S.C. 78f(b)(5). 

17 15 U.S.C. 78f(b)(8). 

18 17 CFR 242.603(a). 19NYSE is an exclusive processor of NYSE depthof-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. 20Securities 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. 

24See 17 CFR 242.603(b). (‘‘Every national 

securities exchange on which an NMS stock is 

Continued 

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. 

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

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

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. 

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

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

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 

11166 Federal Register / Vol. 74, No. 49 / Monday, March 16, 2009 / Notices 

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.’’). 

25See NYSE Arca Order at 74779. 

26 Id. 

27 Id. 

28Source: ArcaVision (available at http:// 

www.arcavision.com). 

29See NYSE Arca Order at 74783. 

30See Richard Posner, Economic Analysis of Law 

§ 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 § 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). 

31See NYSE Arca Order at 74783. 

32 Id. 

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. 

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

TABLE 1—REPORTED SHARE VOLUME IN U.S-LISTED EQUITIES DURING JANUARY 2009 

[%] 

Trading venue All stocks NYSElisted 

NASDAQlisted 

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 

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

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 

Federal Register / Vol. 74, No. 49 / Monday, March 16, 2009 / Notices 11167 

33 Id. 

34See NYSE Arca Order at 74784. 

35 Id. 

36SIFMA Letter at 2. 

37Schwab Letter at 2. 

38Schwab Letter at 1. 

39See 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.’’). 

40See SIFMA Letter at 3 (‘‘SIFMA has long 

advocated a nonprofessional fee for depth-of-book 

data to promote market transparency and investor 

protection’’). 

41 15 U.S.C. 78s(b)(2). 

42 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4 15 U.S.C. 78s(b)(1). 

5See Securities Exchange Act Release Nos. 58704 

(October 1, 2008), 73 FR 59026 (October 8, 2008) 

(order approving listing and trading on the 

Exchange of the Trusts (‘‘Approval Order’’)); 58469 

Continued 

are a significant alternative to the 

exchange’s market data product.33

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

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

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. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.42

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. E9–5570 Filed 3–13–09; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–59542; File No. SR– 

NYSEArca–2009–14] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing of Proposed 

Rule Change Relating to the Leverage 

Factor Applicable to the MacroShares 

Major Metro Housing Trusts 

March 9, 2008. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that, on March 3, 

2009, NYSE Arca, Inc. (‘‘NYSE Arca’’ or 

the ‘‘Exchange’’) filed with the 

Securities and Exchange Commission 

(the ‘‘Commission’’) the proposed rule 

change as described in Items I and II 

below, which Items have been prepared 

by the self-regulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

Pursuant to the provisions of Section 

19(b)(1) of the Act,4 the Exchange, 

through its wholly-owned subsidiary 

NYSE Arca Equities, Inc. (‘‘NYSE Arca 

Equities’’ or the ‘‘Corporation’’) 

proposes to modify the representation 

made in SR–NYSEArca–2008–92 

regarding the leverage factor applicable 

to the MacroShares Major Metro 

Housing Up Trust (‘‘Up Trust’’) and the 

MacroShares Major Metro Housing 

Down Trust (‘‘Down Trust’’) 

(collectively, the ‘‘Trusts’’), and, 

specifically, to indicate that the leverage 

factor to be applied will be 3 rather than 

2. The shares of the Up Trust are 

referred to as the Up MacroShares, and 

the shares of the Down Trust are 

referred to as the Down MacroShares 

(collectively, the ‘‘Shares’’). The text of 

the proposed rule change is available on 

the Exchange’s Web site at http:// 

www.nyse.com, at the Exchange’s 

principal office and at the Public 

Reference Room of the Commission. 

II. Self-Regulatory Organization’s 

Statement of the Purpose of, and 

Statutory Basis for, the Proposed Rule 

Change 

In its filing with the Commission, the 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

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

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Commission has approved 

pursuant to Section 19(b)(2) of the Act 

the Exchange’s proposal to list and trade 

the Up MacroShares and the Down 

MacroShares under NYSE Arca Equities 

Rule 8.400.5 As described in the 

Approval Order and Notice, the Up