Federal Register / Vol. 83, No. 10 / Tuesday, January 16, 2018 / Notices 2261 

11 15 U.S.C. 78s(b)(3)(A)(ii). 

12 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. 54286 

(August 8, 2006), 71 FR 46955 (August 15, 2006) 

(SR–NASDAQ–2006–028). 

4NLS is a market data product that contains realtime last sale information for trades executed on the 

Continued 

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.11 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– 

GEMX–2017–63 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–GEMX–2017–63. 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–GEMX–2017–63, and 

should be submitted on or before 

February 6, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.12

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–00523 Filed 1–12–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–82467; File No. SR– 

NASDAQ–2017–134] 

Self-Regulatory Organizations; The 

Nasdaq Stock Market LLC; Notice of 

Filing and Immediate Effectiveness of 

Proposed Rule Change To Amend 

Exchange Rule 7037 

January 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 December 

26, 2017, The Nasdaq Stock Market LLC 

(‘‘Nasdaq’’ 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. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to Amend 

Exchange Rule 7037 to reflect 

substantial enhancements to the data 

feeds underlying FilterView since the 

current fees were set in 2006. 

Specifically, the Exchange proposes to 

modify the monthly subscription fee for 

FilterView from $500 to $750 per month 

per subset of data. The proposal is 

described further below. 

While these amendments are effective 

upon filing, the Exchange has 

designated the proposed amendments to 

be operative on January 1, 2018. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://nasdaq.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 adjust the 

fee schedule for FilterView to reflect 

substantial enhancements to its 

underlying data feeds since the current 

fee was set in 2006.3 Specifically, the 

Exchange proposes to change the 

monthly subscription fee for FilterView 

from $500 to $750 per month per subset 

of data. 

FilterView 

FilterView allows market data 

Distributors to receive a subset of any 

other real-time data feed offered by the 

Exchange, allowing Distributors to 

control information processing costs by 

lowering the bandwidth required to 

process Exchange data. FilterView is 

commonly purchased in two types: NLS 

FilterView and Nasdaq NOIView. NLS 

FilterView separates Nasdaq Last Sale 

(‘‘NLS’’) 4 data into two distinct data 


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Exchange or reported to the FINRA/Nasdaq Trade 

Reporting Facility. 

5TotalView is the Exchange’s complete Depth-ofBook data feed for Nasdaq-listed securities as well 

as securities listed by other exchanges, and 

provides every eligible order at each price level for 

all Nasdaq members. TotalView includes the Net 

Order Imbalance Indicator (‘‘NOII’’), which 

provides data relating to buy and sell interest at the 

open and close of the trading day, in the context 

of an Initial Public Offering, and after a trading halt. 

6See Securities Exchange Act Release No. 54286 

(August 8, 2006), 71 FR 46955 (August 15, 2006) 

(SR–NASDAQ–2006–028). 

7Many of these upgrades are common to several 

Nasdaq-affiliated exchanges, as improvements to 

the products and services of one exchange are 

reproduced in other exchanges. 

8See http://www.nasdaqtrader.com/ 

TraderNews.aspx?id=dtn2013-45 and http://

www.nasdaqtrader.com/TraderNews.aspx?id=

dtn2013-33. 

9See Securities Exchange Act Release No. 73562 

(November 7, 2014), 79 FR 68309 (November 14, 

2014) (SR–NASDAQ–2014–020) (approving the 

listing and trading of Exchange-Traded Managed 

Fund Shares). 

10See http://www.nasdaqtrader.com/ 

TraderNews.aspx?id=dtn2015-7. 

11See http://www.nasdaqtrader.com/ 

TraderNews.aspx?id=dtn2016-03. 

12See http://www.nasdaqtrader.com/ 

TraderNews.aspx?id=dtn2015-17. 

13See http://www.nasdaqtrader.com/ 

TraderNews.aspx?id=dtn2017-02. 

14Nasdaq’s closing cross process produces a 

tradable closing price that represents either the 

closing cross or the best available price at the time 

of the transaction. 

15See http://www.nasdaqtrader.com/ 

TraderNews.aspx?id=dtn2013-25. 

16See http://www.nasdaqtrader.com/ 

TraderNews.aspx?id=dtn2013-20. 

17The Consumer Price Index increased by 

approximately 21 percent between August 2006 and 

November 2017. See https://data.bls.gov/cgi-bin/ 

cpicalc.pl 

18 15 U.S.C. 78f(b). 

19 15 U.S.C. 78f(b)(4) and (5). 

streams: (i) NLS data from the Nasdaq 

execution system, and (ii) NLS data 

from the FINRA/Nasdaq Trade Trade 

[sic] Reporting Facility (‘‘TRF’’) system. 

Nasdaq NOIView distributes order 

imbalance information from Nasdaq 

TotalView 5 in the minutes leading up to 

the Nasdaq Opening and Closing 

Crosses. This includes an indicative 

clearing price and net order imbalance 

in the Nasdaq execution system. 

Proposed Change 

As a result of substantial 

enhancements to the data feeds 

underlying FilterView since the current 

fee was set in 2006, the Exchange 

proposes to change its monthly 

subscription fee from $500 to $750 per 

month per subset of data. 

The value of Nasdaq FilterView, a 

subset of other market data feeds, is 

inextricably connected to trade 

execution: Market data feeds require 

trade orders to provide useful 

information, and investors utilize such 

data to make trading decisions. Over the 

eleven years that have elapsed since the 

current distribution fees were set,6 the 

Exchange has invested in an array of 

upgrades to both its trade execution and 

market information services, increasing 

the overall value of these services, 

including FilterView.7 These upgrades 

include: 

• Enhanced Services. In 2013 [sic], 

the Exchange enhanced its data feeds 

by: (i) Converting to binary codes to 

make more efficient use of bandwidth 

and to provide greater timestamp 

granularity; (ii) adding a symbol 

directory message to identify a security 

and its key characteristics; (iii) adding a 

new IPO message for Nasdaq-listed 

securities for quotation release time and 

IPO price; and (iv) adding the Market 

Wide Circuit Breaker (‘‘MWCB’’) 

Decline Level message to inform 

recipients of the setting for MWCB 

breach points for the trading day, and an 

MWCB Status Level Message to inform 

data recipients when an MWCB has 

breached an established level.8

• Exchange Traded Managed Funds 

(‘‘ETMFs’’). In 2015, the Exchange 

modified its data feeds to accommodate 

ETMFs, a type of investment vehicle 

that combines the features of an openend mutual funds [sic] and an Exchange 

Traded Fund (‘‘ETF’’) to support an 

actively managed-investment strategy.9

ETF [sic] trading differs from other 

types of equity trading in that it uses a 

trading protocol called ‘‘Net Asset 

Value-Based Trading,’’ in which all 

bids, offers, and execution prices are 

expressed as a premium or discount to 

the ETMF’s next-determined Net Asset 

Value (‘‘NAV’’). This distinct pricing 

format requires an entirely new set of 

data fields in which to distribute 

information related to prices and trades, 

and the Exchange modified Nasdaq 

Basic to accommodate that format.10

• Nanosecond Granularity. In 2016, 

Nasdaq introduced a new version of 

QBBO [sic] which allows for timestamp 

granularity to the nanosecond.11

• Geographic Diversity. In 2015, all of 

the Nasdaq Exchanges moved their 

Disaster Recover [sic] (‘‘DR’’) center 

from Ashburn, Virginia, to Chicago 

Illinois. As a result, customers can both 

receive market data and send orders 

through the Chicago facility, potentially 

reducing overall networking costs. 

Adding such geographic diversity helps 

protect the market in the event of a 

catastrophic event impacting the entire 

East Coast.12

• Chicago ‘‘B’’ Feeds. In 2017, all of 

the Nasdaq exchanges added a multicast 

IP address for proprietary equity and 

options data feeds in Chicago, allowing 

firms the choice of having additional 

redundancy to ensure data continuity.13

• Adjusted Closing Price. In 2013, 

Nasdaq introduced the adjusted closing 

price as a field to reflect a security’s 

previous day official closing price, 

adjusted for corporate actions. For 

Nasdaq-listed securities, the Nasdaq 

Official Closing Price is used,14 and the 

consolidated close from the security’s 

listing exchange is used for non-Nasdaq 

securities.15

• New System Event Messages. In 

2013, Nasdaq began disseminating event 

messages to indicate the start and end 

of system hours.16

While these many changes were in the 

process of implementation, fees for 

Nasdaq FilterView were falling in real 

terms. Indeed, the proposed increase 

from $500 to $750 per month is at least 

partially offset by inflation,17 and 

represents only an approximately 3.75 

percent annual increase over the course 

of the eleven years that elapsed between 

2006 and 2017. The Exchange believes 

that the remaining increase is more than 

justified by the substantial upgrades 

described above. 

As a result of these upgrades, the 

Exchange proposes to change the 

monthly subscription fee for FilterView 

from $500 to $750 per month per subset 

of data. Given these specific 

enhancements to the data feeds 

underlying FilterView, and to the 

Exchange’s systems generally, and given 

the fact that the Exchange has not 

increased the subscription fee since 

2006, the Exchange believes that the 

proposed fee increase is appropriate. 

Nasdaq FilterView is optional in that 

the Exchange is not required to offer it 

and broker-dealers are not required to 

purchase it. Firms can discontinue use 

at any time and for any reason, 

including an assessment of the fees 

charged. 

The proposed change does not change 

the cost of any other Exchange product. 

2. Statutory Basis 

The Exchange believes that its 

proposal is consistent with Section 6(b) 

of the Act,18 in general, and furthers the 

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

of the Act,19 in particular, in that it 

provides for the equitable allocation of 

reasonable dues, fees and other charges 

among members and issuers and other 

persons using any facility, and is not 

designed to permit unfair 

discrimination between customers, 

issuers, brokers, or dealers. 

The Commission and the courts have 

repeatedly expressed their preference 

for competition over regulatory 


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20See Securities Exchange Act Release No. 51808 

(June 9, 2005), 70 FR 37496, 37499 (June 29, 2005) 

(‘‘Regulation NMS Adopting Release’’). 

21NetCoalition v. SEC, 615 F.3d 525 (D.C. Cir. 

2010). 

22See NetCoalition, at 534–535. 

23 Id. at 537. 

24 Id. at 539 (quoting Securities Exchange Act 

Release No. 59039 (December 2, 2008), 73 FR 

74770, 74782–83 (December 9, 2008) (SR– 

NYSEArca–2006–21)). 

25See Securities Exchange Act Release No. 51808 

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

(‘‘Regulation NMS Adopting Release’’). 

26 Id. [sic] 

27See Securities Industry and Financial Markets 

Association, Initial Decision Release No. 1015, 2016 

SEC LEXIS 2278 (A.L.J. June 1, 2016). 

28 Id. at *92. 

intervention in determining prices, 

products, and services in the securities 

markets. In Regulation NMS, while 

adopting a series of steps to improve the 

current market model, the Commission 

highlighted the importance of market 

forces in determining prices and SRO 

revenues and, also, recognized that 

current regulation of the market system 

‘‘has been remarkably successful in 

promoting market competition in its 

broader forms that are most important to 

investors and listed companies.’’ 20

Likewise, in NetCoalition v. Securities 

and Exchange Commission 21

(‘‘NetCoalition’’) the D.C. Circuit upheld 

the Commission’s use of a market-based 

approach in evaluating the fairness of 

market data fees against a challenge 

claiming that Congress mandated a costbased approach.22 As the court 

emphasized, the Commission ‘‘intended 

in Regulation NMS that ‘market forces, 

rather than regulatory requirements’ 

play a role in determining the market 

data . . . to be made available to 

investors and at what cost.’’ 23

Further, ‘‘[n]o one disputes that 

competition for order flow is ‘fierce.’ 

. . . As the SEC explained, ‘[i]n the U.S. 

national market system, buyers and 

sellers of securities, and the brokerdealers that act as their order-routing 

agents, have a wide range of choices of 

where to route orders for execution’; 

[and] ‘no exchange can afford to take its 

market share percentages for granted’ 

because ‘no exchange possesses a 

monopoly, regulatory or otherwise, in 

the execution of order flow from broker 

dealers’. . . .’’ 24

The Exchange proposes to change the 

monthly subscription fee for FilterView 

from $500 to $750 per month per subset 

of data. The Exchange believes that the 

proposed fee increase is reasonable. 

While the Exchange has not increased 

such fees since 2006, the Exchange has 

added a number of enhancements to the 

data feeds underlying FilterView, as 

well as to the Exchange systems in 

general supporting FilterView. These 

enhancements, which are described in 

greater detail above, correspondingly 

enhance the value of FilterView. The 

proposed fee increase is therefore 

reflective of, and closely aligned to, 

these enhancements and the 

correspondingly increased value of the 

data feed. The proposed changes are 

equitable allocations of reasonable dues, 

fees and other charges because all 

recipients will be charged the same fee 

for the same service. The proposed 

changes do not permit unfair 

discrimination between customers, 

issuers, brokers, or dealers because this 

service will be available on a nondiscriminatory basis to all similarlysituated recipients. 

In adopting Regulation NMS, the 

Commission granted self-regulatory 

organizations (‘‘SROs’’) and brokerdealers (‘‘BDs’’) 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.25

The Commission was speaking to the 

question of whether BDs 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 BDs at all, it follows that 

the price at which such data is sold 

should be set by the market as well. 

Accordingly, ‘‘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.’’ 26

The proposed fees, like all market 

data fees, are constrained by the 

Exchange’s need to compete for order 

flow, as discussed below, and are 

subject to competition from other 

exchanges and among broker-dealers for 

customers. If Nasdaq is incorrect in its 

assessment of price, it will lose market 

share as a result. 

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. In terms of 

inter-market competition, the Exchange 

notes that it operates in a highly 

competitive market in which market 

participants can readily favor competing 

venues if they deem fee levels at a 

particular venue to be excessive, or 

rebate opportunities available at other 

venues to be more favorable. In such an 

environment, the Exchange must 

continually adjust its fees to remain 

competitive with other exchanges and 

with alternative trading systems that 

have been exempted from compliance 

with the statutory standards applicable 

to exchanges. Because competitors are 

free to modify their own fees in 

response, and because market 

participants may readily adjust their 

order routing practices, the Exchange 

believes that the degree to which fee 

changes in this market may impose any 

burden on competition is extremely 

limited. 

As noted above, Nasdaq FilterView 

most commonly includes elements of 

NLS and TotalView, which are both 

types of ‘‘non-core’’ data that provide 

subsets of the ‘‘core’’ quotation and last 

sale data provided by securities 

information processors under the CTA 

Plan and the Nasdaq UTP Plan. In 2016, 

an Administrative Law Judge in an 

application for review by the Securities 

Industry and Financial Markets 

Association of actions taken by SelfRegulatory Organizations examined 

whether another ‘‘non-core’’ product, 

Depth-of-Book data, is constrained by 

competitive forces.27 After a four-day 

hearing and presentation of substantial 

evidence, the administrative law judge 

stated that ‘‘competition plays a 

significant role in restraining exchange 

pricing of depth-of-book products’’ 28


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29 Id. 

30 Id. at *93 

31 Id. at *104. 

32 Id. at *86. 

33 Id. at *37. [sic] 

34 Id. at *43. [sic] 

35See 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). 

36Moreover, the level of competition and 

contestability in the market is evident in the 

because ‘‘depth-of-book products from 

different exchanges function as 

substitutes for each other,’’ 29 and, as 

such, ‘‘the threat of substitution from 

depth-of-book customers constrains 

their depth-of-book prices.’’ 30 As a 

result, ‘‘[s]hifts in order flow and threats 

of shifting order flow provide a 

significant competitive force in the 

pricing of... depth-of-book data.’’ 31

The judge concluded that ‘‘[u]nder the 

standards articulated by the 

Commission and DC Circuit, the 

Exchanges have shown that they are 

subject to significant competitive forces 

in setting fees for depth-of-book data: 

The availability of alternatives to the 

Exchanges’ depth-of-book products, and 

the Exchanges’ need to attract order 

flow from market participants 

constrains prices.’’ 32 In addition, the 

administrative law judge stated that 

‘‘[s]hifts in order flow and threats of 

shifting order flow provide a significant 

competitive force in the pricing 

of . . . depth-of-book data.’’ 33 As 

such, Nasdaq’s depth-of-book fees are 

‘‘constrained by significant competitive 

forces.’’ 34

Market forces constrain the price of 

Nasdaq FilterView, just as they do other 

market data fees, in the competition 

among exchanges and other entities to 

attract order flow and in the 

competition among Distributors for 

customers. Order flow is the ‘‘life 

blood’’ of the exchanges. Broker-dealers 

currently have numerous alternative 

venues for their order flow, including 

self-regulatory organization (‘‘SRO’’) 

markets, as well as internalizing BDs 

and various forms of alternative trading 

systems (‘‘ATSs’’), including dark pools 

and electronic communication networks 

(‘‘ECNs’’). Each SRO market competes to 

produce transaction reports via trade 

executions, and two FINRA-regulated 

TRFs compete to attract internalized 

transaction reports. The existence of 

fierce competition for order flow 

implies a high degree of price sensitivity 

on the part of BDs, which may readily 

reduce costs by directing orders toward 

the lowest-cost trading venues. 

Transaction execution and proprietary 

data products are complementary in that 

market data is both an input and a 

byproduct of the execution service. In 

fact, market data and trade execution are 

a paradigmatic example of joint 

products with joint costs. The decision 

whether and on which platform to post 

an order will depend on the attributes 

of the platform where the order can be 

posted, including the execution fees, 

data quality and price, and distribution 

of its data products. Without trade 

executions, exchange data products 

cannot exist. Moreover, data products 

are valuable to many end users only 

insofar as they provide information that 

end users expect will assist them or 

their customers in making trading 

decisions. 

The costs of producing market data 

include not only the costs of the data 

distribution infrastructure, but also the 

costs of designing, maintaining, and 

operating the exchange’s transaction 

execution platform and the cost of 

regulating the exchange to ensure its fair 

operation and maintain investor 

confidence. The total return that a 

trading platform earns reflects the 

revenues it receives from both products 

and the joint costs it incurs. 

Moreover, 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).35

In Nasdaq’s case, it is costly 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 are each subject to 

significant scale economies. In such 

cases, marginal cost pricing is not 

feasible because if all sales were priced 

at the margin, Nasdaq would be unable 

to defray its platform costs of providing 

the joint products. 

An exchange’s BD customers view the 

costs of transaction executions and of 

data as a unified cost of doing business 

with the exchange. A BD 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 BD 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 BD will 

choose not to buy it. Moreover, as a BD 

chooses to direct fewer orders to a 

particular exchange, the value of the 

product to that BD decreases, for two 

reasons. First, the product will contain 

less information, because executions of 

the BD’s trading activity will not be 

reflected in it. Second, and perhaps 

more important, the product will be less 

valuable to that BD because it does not 

provide information about the venue to 

which it is directing its orders. Data 

from the competing venue to which the 

BD is directing more orders will become 

correspondingly more valuable. 

Competition among trading platforms 

can be expected to constrain the 

aggregate return each platform earns 

from the sale of its joint products, but 

different platforms may choose from a 

range of possible, and equally 

reasonable, pricing strategies as the 

means of recovering total costs. Nasdaq 

pays rebates to attract orders, charges 

relatively low prices for market 

information and charges relatively high 

prices for accessing posted liquidity. 

Other platforms may choose a strategy 

of paying lower liquidity rebates to 

attract orders, setting relatively low 

prices for accessing posted liquidity, 

and setting relatively high prices for 

market information. Still others may 

provide most data free of charge and 

rely exclusively on transaction fees to 

recover their costs. Finally, some 

platforms may incentivize use by 

providing opportunities for equity 

ownership, which may allow them to 

charge lower direct fees for executions 

and data. 

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.36


daltland on DSKBBV9HB2PROD with NOTICES
Federal Register / Vol. 83, No. 10 / Tuesday, January 16, 2018 / Notices 2265 

numerous alternative venues that compete for order 

flow, including SRO markets, internalizing BDs and 

various forms of alternative trading systems 

(‘‘ATSs’’), including dark pools and electronic 

communication networks (‘‘ECNs’’). Each SRO 

market competes to produce transaction reports via 

trade executions, and two FINRA-regulated TRFs 

compete to attract internalized transaction reports. 

It is common for BDs to further and 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, BDs, and ATSs that currently produce 

proprietary data or are currently capable of 

producing it provides further pricing discipline for 

proprietary data products. Each SRO, TRF, ATS, 

and BD is currently permitted to produce 

proprietary data products, and many currently do 

or have announced plans to do so, including 

Nasdaq, NYSE, NYSE MKT, NYSE Arca, IEX, and 

BATS/Direct Edge. 

37 15 U.S.C. 78s(b)(3)(A)(ii). 

38 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

The proposed change is to increase 

the monthly subscription fee for 

FilterView from $500 to $750 per month 

per subset of data. The proposal will not 

impose any burden on competition 

because it is simply a price change that 

will not alter the overall market 

structure. Because the proposed fees 

will become one aspect of the total cost 

of interacting with the Exchange, the 

Exchange will lose revenue if these total 

costs prove to be excessive. 

Accordingly, the Exchange does not 

believe that the proposed changes will 

impair the ability of members or 

competing order execution venues to 

maintain their competitive standing in 

the financial markets. 

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.37

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– 

NASDAQ–2017–134 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–NASDAQ–2017–134. 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–NASDAQ–2017–134 and 

should be submitted on or before 

February 6, 2018. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.38

Eduardo A. Aleman, 

Assistant Secretary. 

[FR Doc. 2018–00524 Filed 1–12–18; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–82472; File No. SR–ISE– 

2018–03] 

Self-Regulatory Organizations; Nasdaq 

ISE, LLC; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change To Amend the Price Level 

Protection Rule 

January 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 January 2, 

2018, Nasdaq ISE, LLC (‘‘ISE’’ or 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘Commission’’) the proposed rule 

change as described in Items I and II 

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 proposes to amend 

Rule 714(b)(4) (Price Level Protection) 

to clarify the operation of the Price 

Level Protection. 

The text of the proposed rule change 

is available on the Exchange’s website at 

http://ise.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 


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