25014 Federal Register / Vol. 75, No. 87 / Thursday, May 6, 2010 / Notices 

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

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

6 15 U.S.C. 78s(b)(3)(A)(iii). 

7 17 CFR 240.19b–4(f)(6). 

8 15 U.S.C. 78s(b)(3)(A). 

9 17 CFR 240.19b–4(f)(6). In addition, Rule 19b– 

4(f)(6)(iii) requires the Exchange to give the 

Commission written notice of the Exchange’s intent 

to file the proposed rule change along with a brief 

description and text of the proposed rule change, 

at least five business days prior to the date of filing 

of the proposed rule change, or such shorter time 

as designated by the Commission. The Exchange 

has satisfied the pre-filing requirement. 

10 17 CFR 200.30–3(a)(12). 

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

2 17 CFR 240.19b–4. 

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 

Currently, pursuant to NYSE Arca 

Equities Rule 7.31(h)(5), when the 

market is locked, an MPL Order will 

trade at the locked price, but where the 

market is crossed, the MPL Order will 

wait for the market to uncross before 

becoming eligible to trade again. By this 

proposal, the Exchange seeks to have 

MPL Orders wait to execute while the 

market is locked, before becoming 

eligible to trade again when the market 

is no longer locked. The Exchange 

believes that this change, based on 

feedback from customers, is a minor 

adjustment to an existing order type. 

2. Statutory Basis 

The proposed rule change is 

consistent with Section 6(b) 4 of the 

Securities Exchange Act of 1934 (the 

‘‘Act’’), in general, and furthers the 

objectives of Section 6(b)(5) 5 in 

particular in that it is designed to 

prevent fraudulent and manipulative 

acts and practices, to promote just and 

equitable principles of trade, to foster 

cooperation and coordination with 

persons engaged in facilitating 

transactions in securities, and to remove 

impediments to and perfect the 

mechanism of a free and open market 

and a national market system. 

Specifically, the proposed rule change is 

a minor adjustment to an existing order 

type. 

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 that is not 

necessary or appropriate in furtherance 

of the purposes of the Act. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants, or Others 

No written comments were solicited 

or received with respect to the proposed 

rule change. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

The Exchange has filed the proposed 

rule change pursuant to Section 

19(b)(3)(A)(iii) of the Act 6 and Rule 

19b–4(f)(6) thereunder.7 Because the 

proposed rule change does not: (i) 

Significantly affect the protection of 

investors or the public interest; (ii) 

impose any significant burden on 

competition; and (iii) become operative 

prior to 30 days from the date on which 

it was filed, or such shorter time as the 

Commission may designate, if 

consistent with the protection of 

investors and the public interest, the 

proposed rule change has become 

effective pursuant to Section 19(b)(3)(A) 

of the Act 8 and Rule 19b–4(f)(6)(iii) 

thereunder.9

At any time within 60 days of the 

filing of the proposed rule change, the 

Commission may summarily abrogate 

such rule change if it appears to the 

Commission that such action is 

necessary or appropriate in the public 

interest, for the protection of investors, 

or otherwise in furtherance of the 

purposes of the Act. 

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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–NYSEArca–2010–27 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–NYSEArca–2010–27. This 

file number should be included on the 

subject line if e-mail 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 Web site (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 Web site viewing and 

printing in the Commission’s Public 

Reference Section, 100 F Street, NE., 

Washington, DC 20549–1090 on official 

business days between the hours of 10 

a.m. and 3 p.m. Copies of the filing will 

also be available for inspection and 

copying at NYSE Arca’s principal office 

and on its Internet Web site at http:// 

www.nyse.com. All comments received 

will be posted without change; the 

Commission does not edit personal 

identifying information from 

submissions. You should submit only 

information that you wish to make 

available publicly. All submissions 

should refer to File Number SR– 

NYSEArca–2010–27 and should be 

submitted on or before May 27, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.10

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–10599 Filed 5–5–10; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62001; File No. SR–BX– 

2010–027] 

Self-Regulatory Organizations; 

NASDAQ OMX BX, Inc.; Notice of Filing 

of Proposed Rule Change To Establish 

New Fee for TotalView Service 

Available to Non-Professionals and To 

Establish an Optional Non-Display 

Usage Cap for Internal Distributors of 

TotalView 

April 29, 2010. 

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

Securities Exchange Act of 1934 

(‘‘Act’’) 1 and Rule 19b–4 thereunder,2

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Federal Register / Vol. 75, No. 87 / Thursday, May 6, 2010 / Notices 25015 

3Both NYSE Arca, Inc. and the New York Stock 

Exchange LLC offer full-depth products. See, e.g., 

Securities Exchange Act Release No. 53469 (March 

10, 2006), 71 FR 14045 (March 20, 2006) (SR–PCX– 

2006–24) and Securities Exchange Act Release No. 

44138 (December 7, 2001), 66 FR 64895 (December 

14, 2001) (SR–NYSE–2001–42), respectively. 

notice is hereby given that on April 23, 

2010, NASDAQ OMX BX, Inc. (the 

‘‘Exchange’’) filed with the Securities 

and Exchange Commission 

(‘‘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 establish a 

$1 per month fee for non-professional 

use of real-time quotation and order 

information from the BX Market Center 

quoting and trading of The NASDAQ 

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

York Stock Exchange LLC (‘‘NYSE’’), 

NYSE Amex LLC (‘‘Amex’’) and other 

regional exchange-listed securities; and 

(ii) to approve the creation of an 

optional non-display usage cap of 

$16,000 per month for internal 

distributors of BX TotalView. 

The text of the proposed rule change 

is below. Proposed new language is in 

italics and proposed deletions are in 

brackets. 

* * * * * 

7023. BX TotalView 

(a) BX TotalView Entitlement 

The BX TotalView entitlement allows 

a subscriber to see all individual 

NASDAQ OMX BX Equities System 

participant orders and quotes displayed 

in the system [as well as] the aggregate 

size of such orders and quotes at each 

price level, and the trade data for 

executions that occur within [in the 

execution functionality of] the NASDAQ 

OMX BX Equities System. 

(1) Except as provided elsewhere in 

this rule, [in (a)(2)], for the BX 

TotalView entitlement there shall be a 

$20 monthly charge for each Subscriber 

of BX TotalView for Nasdaq issues and 

a $20 monthly charge for each 

Subscriber of BX TotalView for NYSE 

and regional issues. 

(2) As an alternative to (a)(1), a 

market participant may purchase an 

enterprise license at a rate of $16,000 

per month for internal use of nondisplay data. The enterprise license 

entitles a distributor to provide BX 

TotalView to an unlimited number of 

non-display devices within its firm. 

(3) Free-Trial Offers 

(A)–(B) No change. 

(b) Non-Professional Services 

(1) The charge to be paid by nonprofessional subscribers for access to 

TotalView Service through an 

authorized vendor shall be $1.00 per 

interrogation device per month. 

(2) A ‘‘non-professional’’ is a natural 

person who is neither: 

(A) registered or qualified in any 

capacity with the Commission, the 

Commodities Futures Trading 

Commission, any state securities 

agency, any securities exchange or 

association, or any commodities or 

futures contract market or association; 

(B) engaged as an ‘‘investment 

adviser’’ as that term is defined in 

Section 201(11) of the Investment 

Advisors Act of 1940 (whether or not 

registered or qualified under that Act); 

nor 

(C) employed by a bank or other 

organization exempt from registration 

under federal or state securities laws to 

perform functions that would require 

registration or qualification if such 

functions were performed for an 

organization not so exempt. 

(c) No change. 

* * * * * 

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: (i) To 

establish a $1 per month fee for nonprofessional use of real-time quotation 

and order information from the BX 

Market Center quoting and trading of 

Nasdaq-, NYSE-, Amex- and other 

regional exchange-listed securities; and 

(ii) to approve the creation of an 

optional non-display usage cap of 

$16,000 per month for internal 

distributors of BX TotalView. 

BX TotalView $1 Fee for NonProfessional Subscribers: 

The Exchange proposes to establish a 

new fee for its BX TotalView data 

product that is similar to that of Nasdaq. 

Like Nasdaq TotalView, BX TotalView 

provides all displayed quotes and orders 

in the market, with attribution to the 

relevant market participant, at every 

price level, as well as total displayed 

anonymous interest at every price level. 

To encourage more competition in the 

trading and quoting of U.S. exchangelisted stocks, as well as to encourage 

subscribership to Exchange full-depth 

products, the Exchange is proposing 

Rule 7023(b) to establish a $1 per month 

fee for non-professional subscribers to 

BX TotalView.3 BX TotalView consists 

of real-time market participant 

quotation information regarding the 

Exchange’s trading of Nasdaq-, NYSE-, 

Amex- and other exchange-listed stocks. 

The Commission has previously only 

approved a fee of $20 per month for 

both BX TotalView for Nasdaq and 

NYSE and all other regional exchangelisted issues combined. BX intended to 

establish these as separate fees and 

charged users beginning in January of 

2010 a fee of $20 per month for BX 

TotalView and an additional fee of $20 

for NYSE and all other regional 

exchange-listed issues. Therefore, Rule 

7023(a)(1) is being amended to correct 

this inadvertent error since the existing 

rule language does not clearly establish 

a fee of $20 per month for BX TotalView 

for Nasdaq issues and a separate fee of 

$20 per month for BX TotalView for 

NYSE and all other regional exchangelisted issues, as intended. All such fees 

exceeding the $20 combined fee as 

currently stated in the rulebook are 

being refunded and BX will continue to 

assess a single $20 fee until this 

proposed rule change is approved. The 

Exchange notes that it operates in a 

highly competitive market in which 

market participants can readily switch 

to competing venues if they deem fee 

levels at a particular venue to be 

excessive. The Exchange believes that 

its fees continue to be reasonable and 

equitably allocated. 

The Exchange believes that 

establishing a $1 per month fee for nonprofessional subscribers to BX 

TotalView will promote wider 

distribution of data and benefit 

investors wishing to use that data in 

making investment decisions. The 

establishment of non-professional fees is 

a well-established practice of the 

network processors that distribute realtime consolidated data for Nasdaq, 

NYSE, and Amex stocks. As such, nonprofessional fees have been determined 

to be consistent with the Act and also 

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25016 Federal Register / Vol. 75, No. 87 / Thursday, May 6, 2010 / Notices 

4See Securities Exchange Act Release No. 61700 

(March 12, 2010), 75 FR 13172 (March 18, 2010) 

(SR–NASDAQ–2010–034). 

5 15 U.S.C. 78f. 

6 15 U.S.C. 78f(b)(4), (5). 

7Securities Exchange Act Release No. 59039 

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

2008) (SR–NYSEArca-2006–21). 

8 Id. 

9 Id. 

to be in the best interests of investors 

and the public. 

The fees are not unreasonably 

discriminatory, since the fees for nonprofessionals are uniform for all nonprofessionals. The fees are fair and 

reasonable in that they compare 

favorably to fees charged by other 

exchanges for comparable products. 

Rule 7023(a) is also being amended to 

clarify the data that is included in the 

BX TotalView Entitlement specifically 

includes trade data for executions that 

occur within the NASDAQ OMX 

Equities System. The data included 

remains consistent with what has 

always been included in the BX 

TotalView Entitlement, as well as the 

data included in the Nasdaq TotalView 

Entitlement. This revision is intended 

for clarification purposes only. 

BX TotalView Enterprise License: 

The Exchange is proposing to amend 

Exchange Rule 7023 and establish an 

optional $16,000 per month non-display 

BX TotalView fee cap for internal 

distributors, which would encompass 

both BX TotalView for Nasdaq issues 

and BX TotalView for NYSE and 

regional issues. The BX TotalView fee 

cap would not include distributor fees. 

By providing this non-display usage 

cap, firms will have more administrative 

flexibility in their consumption of BX 

TotalView information. 

Currently, the Exchange requires that 

internal distributors count and report 

each server and display device that 

processes BX TotalView-ITCH data as a 

professional BX TotalView user. Some 

firms report upwards of 500 devices, 

while other firms report as few as one 

non-display device using BX TotalViewITCH data. 

The Exchange proposes to permit a 

market participant to purchase an 

enterprise license at a rate of $16,000 

per month for non-display usage in a 

firm. As the number of devices increase, 

so does the administrative burden on 

the end customer of counting these 

devices. For firms that feel they are near 

the capped amount, this new enterprise 

license helps relieve this administrative 

burden. Additionally, firms would 

purchase this optional enterprise license 

to reduce fees so no firms would 

experience a fee increase as a result of 

this filing. The Exchange’s filing is 

substantially similar to a recent Nasdaq 

filing.4

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the provisions of Section 6 of the Act,5

in general, and with Sections 6(b)(4) and 

6(b)(5) of the Act,6 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 or 

system which the Exchange operates or 

controls and is not designed to permit 

unfair discrimination between 

customers, issuers, brokers, or dealers. 

Specifically, the BX TotalView fee for 

non-professional subscribers, the 

Exchange makes all services and 

products subject to these fees available 

on a non-discriminatory basis to 

similarly situated recipients. All fees are 

structured in manner comparable to 

corresponding fees of Nasdaq already in 

effect. The proposed fees for BX 

TotalView are equitably allocated since 

the fees for non-professionals are 

uniform for all non-professionals. The 

fees are fair and reasonable in that they 

compare favorably to fees charged by 

other exchanges for comparable 

products. 

The Exchange proposes to increase 

the existing $20 combined fee for both 

BX TotalView for Nasdaq and NYSE and 

all other regional exchange-listed issues 

by charging two separate $20 fees per 

month. One $20 fee would be charged 

for BX TotalView for Nasdaq and the 

other $20 fee would be charged for 

NYSE and all other regional exchangelisted issues. The $20 increase per 

month for subscribers is modest. 

Additionally, the Exchange notes that it 

operates in a highly competitive market 

in which market participants can 

readily switch to competing venues if 

they deem fee levels at a particular 

venue to be excessive. The Exchange 

believes that its fees continue to be 

reasonable and equitably allocated. 

The Exchange’s competitive response 

to pricing pressures in a competitive 

marketplace is consistent with what the 

Commission has described as ‘‘the clear 

intent of Congress in adopting Section 

11A of the Exchange Act that, whenever 

possible, competitive forces should 

dictate the services and practices that 

constitute the U.S. national market 

system for trading equity securities.’’ 7

Specifically with respect to pricing of 

non-core data products, the Commission 

has stated that ‘‘[t]he Exchange Act and 

its legislative history strongly support 

the Commission’s reliance on 

competition, whenever possible, in 

meeting its regulatory responsibilities.’’ 8

A price reduction in response to 

competitive forces, such as the proposal 

here, is the essence of competition. 

The Exchange believes that it is 

neither inequitable nor unfairly 

discriminatory to provide volume-based 

discounts to members that contribute to 

the success of both the transaction 

execution and data businesses, in light 

of the link between these businesses 

that the Commission has recognized. In 

doing so, the Exchange not only 

acknowledges the multiple 

contributions of such customers to its 

profitability and the value it provides to 

other customers, but also provides 

incentives for other firms to increase 

their use of the Exchange’s services 

across these business lines. 

Discounts based on a member’s 

aggregate volumes of usage have 

routinely been adopted by exchanges 

(and by participants in many other 

industries), even though a member that 

reduces its volumes by trading in other 

markets may no longer qualify for the 

discount. For example, Nasdaq has 

volume pricing discounts for transaction 

executions and data currently in effect 

under Rules 7018 and 7023. A member 

that opts to provide high volumes of 

liquidity and distribute TotalView to 

large numbers of subscribers under an 

enterprise license currently receives 

favorable pricing for both executions 

and data, based on the aggregate volume 

of business that it brings to the 

exchange. If the member opts to direct 

order flow to another exchange or 

distribute other data products in lieu of 

TotalView, the discount will no longer 

be available—not because the member is 

being penalized, but simply because its 

consumption of products has dropped 

to a level that no longer justifies 

discounted pricing. 

As the Commission has found, market 

data and execution services are 

effectively a joint product—one in 

which market data is both an input to, 

and a byproduct of, trade execution.9

Accordingly, the Exchange believes that 

it is entirely appropriate that the 

benefits to the Exchange when a 

member provides liquidity and 

consumes and distributes data should 

be shared with the customers that 

provide those benefits. Notably, the Act 

does not prohibit all distinctions among 

customers, but rather discrimination 

that is unfair. And, as the Commission 

has recognized, ‘‘[i]f competitive forces 

are operative, the self-interest of the 

exchanges themselves will work 

powerfully to constrain unreasonable or 

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Federal Register / Vol. 75, No. 87 / Thursday, May 6, 2010 / Notices 25017 

10 Id. 

11 Id. 

12 Id. 

13 Id. 14 Id. 

15However, on April 9, 2010 the Commission 

approved BATS proposed rule change to begin 

Continued 

unfair behavior.’’ 10 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.’’ 11 The proposal here 

was made not only in the presence of 

competition, but it is a direct product of 

competitive forces. 

B. Self-Regulatory Organization’s 

Statement on Burden on Competition 

The Exchange does not believe that 

the proposed rule change will result in 

any burden on competition. To the 

contrary, the Exchange’s proposed price 

reduction in response to competitive 

pricing offers is the essence of 

competition. As the Supreme Court has 

recognized, ‘‘cutting prices in order to 

increase business often is the very 

essence of competition.’’ Matsushita 

Elec. Indus. Co. v. Zenith Radio Corp., 

475 U.S. 574, 594 (1986). 

If competitors lose business to the 

Exchange because the Exchange offers 

more attractive pricing, that is not a 

reduction of competition. Rather, it is a 

result of competition. As the Supreme 

Court has recognized: 

When a firm * * * lowers prices but 

maintains them above predatory levels, the 

business lost by rivals cannot be viewed as 

an ‘‘anticompetitive’’ consequence of the 

claimed violation. A firm complaining about 

the harm it suffers from nonpredatory price 

competition ‘‘is really claiming that it [is] 

unable to raise prices.’’ This is not antitrust 

injury; indeed, ‘‘cutting prices in order to 

increase business often is the very essence of 

competition.’’ The antitrust laws were 

enacted for ‘‘the protection of competition, 

not competitors.’’ 

Atlantic Richfield Co. v. USA Petroleum 

Co., 495 U.S. 328, 337–38 (1990) 

(emphasis in original; citations omitted). 

Likewise with respect to the Exchange 

Act, Congress has ‘‘expressed its 

preference for the Commission to rely 

on competition’’ with respect to market 

information.12 Accordingly, in 

circumstances analogous to those here, 

the Commission has stated that ‘‘reliance 

on competitive forces is the most 

appropriate and effective means to 

assess whether terms for the distribution 

of non-core data are equitable, fair and 

reasonable, and not unreasonably 

discriminatory. If competitive forces are 

operative, the self-interest of the 

exchanges themselves will work 

powerfully to constrain unreasonable or 

unfair behavior.’’ 13

As the Commission recently 

recognized,14 the market for transaction 

execution and routing services is highly 

competitive, and the market for 

proprietary data products is 

complementary to it, since the ultimate 

goal of such products is to attract further 

order flow to an exchange. Thus, 

exchanges lack the ability to set fees for 

executions or data at inappropriately 

high levels. Order flow is immediately 

transportable to other venues in 

response to differences in cost or value. 

Similarly, if data fees are set at 

inappropriate levels, customers that 

control order flow will not make use of 

the data and will be more inclined to 

send order flow to exchanges providing 

data at fees they consider more 

reasonable. 

The market for proprietary data 

products is currently competitive and 

inherently contestable because there is 

fierce competition for the inputs 

necessary to the creation of proprietary 

data and strict pricing discipline for the 

proprietary products themselves. 

Numerous exchanges compete with 

each other for listings, trades, and 

market data itself, providing virtually 

limitless opportunities for entrepreneurs 

who wish to produce and distribute 

their own market data. This proprietary 

data is produced by each individual 

exchange, as well as other entities, in a 

vigorously competitive market. 

With regard to the market for 

executions, broker-dealers currently 

have numerous alternative venues for 

their order flow, including multiple 

competing self-regulatory organization 

(‘‘SRO’’) markets, as well as brokerdealers (‘‘BDs’’) and aggregators such as 

the Direct Edge and LavaFlow electronic 

communications networks (‘‘ECNs’’). 

Each SRO market competes to produce 

transaction reports via trade executions, 

and FINRA-regulated Trade Reporting 

Facilities (‘‘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, and ECNs that 

currently produce proprietary data or 

are currently capable of producing it 

provides further pricing discipline for 

proprietary data products. Each SRO, 

TRF, ECN and BD is currently permitted 

to produce proprietary data products, 

and many currently do or have 

announced plans to do so, including 

NASDAQ, NYSE, NYSEArca, BATS, 

and Direct Edge. 

Any ECN or BD can combine with any 

other ECN, broker-dealer, or multiple 

ECNs or BDs to produce jointly 

proprietary data products. Additionally, 

non-BDs such as order routers like 

LAVA, as well as market data vendors 

can facilitate single or multiple brokerdealers’ production of proprietary data 

products. The potential sources of 

proprietary products are virtually 

limitless. 

The fact that proprietary data from 

ECNs, BDs, and vendors can by-pass 

SROs is significant in two respects. 

First, non-SROs can compete directly 

with SROs for the production and 

distribution of proprietary data 

products, as Archipelago and BATS 

Trading did prior to registering as 

SROs. Second, because a single order or 

transaction report can appear in an SRO 

proprietary product, a non-SRO 

proprietary product, or both, the data 

available in proprietary products is 

exponentially greater than the actual 

number of orders and transaction 

reports that exist in the marketplace 

writ large. 

Market data vendors provide another 

form of price discipline for proprietary 

data products because they control the 

primary means of access to end users. 

Although their business models may 

differ, vendors exercise pricing 

discipline because they can simply 

refuse to purchase any proprietary data 

product that fails to provide sufficient 

value. The Exchange and other 

producers of proprietary data products 

must understand and respond to these 

varying business models and pricing 

disciplines in order to successfully 

market proprietary data products. 

In addition to the competition and 

price discipline described above, the 

market for proprietary data products is 

also highly contestable because market 

entry is rapid, inexpensive, and 

profitable. The history of electronic 

trading is replete with examples of 

entrants that swiftly grew into some of 

the largest electronic trading platforms 

and proprietary data producers: 

Archipelago, Bloomberg Tradebook, 

Island, RediBook, Attain, TracECN, 

BATS Trading, and Direct Edge. Today, 

BATS publishes its data at no charge on 

its website in order to attract order flow, 

and it uses market data revenue rebates 

from the resulting executions to 

maintain low execution charges for its 

users.15 Several ECNs have existed 

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25018 Federal Register / Vol. 75, No. 87 / Thursday, May 6, 2010 / Notices 

offering and charging for three new data products, 

which include BATS Last Sale Feed, BATS 

Historical Data Products, and a data product called 

BATS Market Insight. See Securities Exchange Act 

Release No.61885 (April 9, 2010), 75 FR 20018 

(April 16, 2010). 

16The Commission has recognized that an 

exchange’s failure to strike this balance correctly 

will only harm the exchange. ‘‘[M]any market 

participants would be unlikely to purchase the 

exchange’s data products if it sets fees that are 

inequitable, unfair, unreasonable, or unreasonably 

discriminatory * * *. For example, an exchange’s 

attempt to impose unreasonably or unfairly 

discriminatory fees on a certain category of 

customers would likely be counter-productive for 

the exchange because, in a competitive 

environment, such customers generally would be 

able to respond by using alternatives to the 

exchanges data.’’ Id. 

17 Id. 18 17 CFR 200.30–3(a)(12). 

profitably for many years with a 

minimal share of trading, including 

Bloomberg Tradebook and LavaFlow. 

The proposed rule change is a direct 

response to this competition. It 

recognizes the concern that the order 

flow and data product use that such 

firms currently bring to the Exchange 

may migrate elsewhere if their 

contributions are not appropriately 

recognized. At the same time, if other 

customers determine that their fees are 

too high in comparison to those paid by 

firms qualifying for the discount, they 

will take their business to other venues. 

Thus, the proposal must strike a balance 

between growing and retaining the 

business of actual and potential firms 

and the business of firms that lack the 

volume of business to become eligible. 

In light of the highly competitive nature 

of these markets, the Exchange’s 

revenues and market share are likely to 

be diminished by the proposal if it 

strikes this balance in the wrong way.16

Finally, the concern identified by the 

Commission with respect to ‘‘an 

exchange proposal that seeks to penalize 

market participants for trading in 

markets other than the proposing 

exchange’’ is inapplicable here.17 It is 

important that the Commission avoid 

stifling competition on the merits— 

including competition on price—out of 

a concern for protecting competitors 

from pricing pressure. Indeed, the 

Supreme Court has cautioned that 

‘‘mistaken inferences in cases’’ involving 

alleged harm to competitors from low 

prices ‘‘are especially costly, because 

they chill the very conduct the antitrust 

laws are designed to protect.’’ 

Matsushita, 475 U.S. at 594. 

A concern that access to market data 

could be used to ‘‘penalize’’ market 

participants for trading in other markets 

may be plausible only if (a) the market 

data of the exchange in question is so 

essential to customers that the exchange 

has market power by virtue of the data, 

(b) the exchange requires customers to 

trade on its platform in exchange for 

access to the market data, and (c) 

competition on the merits is thwarted 

by the conditioning. None of those 

conditions is met here. As noted above, 

there is robust competition for market 

data, and customers can and do switch 

among various providers of market data. 

It would thus be implausible to suggest 

that the Exchange has any market power 

by virtue of its market data. Second, the 

Exchange has not attempted to 

condition access to market data on a 

customer’s refusal to use a competitor’s 

platform. Nor has the Exchange 

attempted to impose a ‘‘penalty’’ on 

anyone—to the contrary, it is proposing 

a price reduction to respond to 

competitive offers. And, as noted above, 

the price reduction proposed here is the 

essence of competition, rather than an 

effort to thwart competition on the 

merits. 

C. Self-Regulatory Organization’s 

Statement on Comments on the 

Proposed Rule Change Received From 

Members, Participants or Others 

Written comments were neither 

solicited nor received. 

III. Date of Effectiveness of the 

Proposed Rule Change and Timing for 

Commission Action 

Within 35 days of the date of 

publication of this notice in the Federal 

Register or within such longer period (i) 

as the Commission may designate up to 

90 days of such date if it finds such 

longer period to be appropriate and 

publishes its reasons for so finding or 

(ii) as to which the self-regulatory 

organization consents, the Commission 

will: 

A. By order approve such proposed 

rule change, or 

B. Institute proceedings to determine 

whether the proposed rule change 

should be 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 e-mail to rulecomments@sec.gov. Please include File 

Number SR–BX–2010–027 on the 

subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Elizabeth M. Murphy, Secretary, 

Securities and Exchange Commission, 

100 F Street, NE., Washington, DC 

20549–1090. 

All submissions should refer to File 

Number SR–BX–2010–027. This file 

number should be included on the 

subject line if e-mail 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 Web site (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 Web site viewing and 

printing in the Commission’s Public 

Reference Room, on official business 

days between the hours of 10 a.m. and 

3 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; the Commission does 

not edit personal identifying 

information from submissions. You 

should submit only information that 

you wish to make available publicly. All 

submissions should refer to File 

Number SR–BX–2010–027 and should 

be submitted on or before May 27, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.18

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–10597 Filed 5–5–10; 8:45 am] 

BILLING CODE 8011–01–P 

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