31830 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Notices 

15 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. 61878 

(April 8, 2010), 75 FR 20023 (April 16, 2010) 

(‘‘Notice’’). 

4See Letter from Lawrence Lempert, Bullock 

Trading, LP, Michael Waber, Fairview Trading 

Corp., Andy Yang, Cutler Group, LP, Theodore 

Raven, TSR Associates, LLC, and Tim Lobach, 

Keystone Trading Partners to Mary Schapiro, 

Chairman, Commission, dated May 3, 2010 

(‘‘Lempert Letter’’) and Letter from Robert Sullivan, 

Empire Options Corporation to Mary Schapiro, 

Chairman, Commission, received May 3, 2010 

(‘‘Sullivan Letter’’). See also Letter from Michael 

Waber, Fairview Trading, Inc., to Elizabeth M. 

Murphy, Secretary, Commission, dated May 23, 

2010 (‘‘Waber Letter’’) (responding to the Phlx 

Letter, infra note 5). 

5See Letter from Richard S. Rudolph, Assistant 

General Counsel, NASDAQ OMX PHLX, Inc. to 

Elizabeth M. Murphy, Secretary, Commission, dated 

May 13, 2010 (‘‘Phlx Letter’’). 

6See Securities Exchange Act Release No. 59995 

(May 28, 2009), 74 FR 26750 (June 3, 2009) (SR– 

Phlx–2009–32). 

7See Securities Exchange Act Release No. 60459 

(August 7, 2009), 74 FR 41466 (August 17, 2009) 

(SR–Phlx–2009–54). The Exchange represents that 

the data contained in the TOPO data feed is 

identical to the data sent to the processor for the 

Options Price Regulatory Authority (‘‘OPRA’’), and 

the TOPO and OPRA data leave the Phlx XL II 

system at the same time. 

8See Securities Exchange Act Release No. 60877 

(October 26, 2009), 74 FR 56255 (October 30, 2009) 

(SR–Phlx–2009–92). 

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–CBOE–2010–052 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–CBOE–2010–052. 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, 100 F Street, NE., 

Washington, DC 20549, 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–CBOE– 

2010–052 and should be submitted on 

or before June 25, 2010. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.15

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–13438 Filed 6–3–10; 8:45 am] 

BILLING CODE 8010–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–62194; File No. SR–Phlx– 

2010–48] 

Self-Regulatory Organizations; Order 

Approving Proposed Rule Change by 

NASDAQ OMX PHLX, Inc. Relating to 

Market Data Fees 

May 28, 2010. 

I. Introduction 

On April 6, 2010, NASDAQ OMX 

PHLX, Inc. (‘‘Phlx’’ or ‘‘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 establish fees for a data 

product, Top of Phlx Options Plus 

Orders (‘‘TOPO Plus Orders’’ or ‘‘TOPO 

Plus’’), which currently provides 

disseminated Exchange top-of-market 

data (including orders, quotes and 

trades), together with all information 

that is included in the Exchange’s 

Specialized Order Feed (‘‘SOF’’). The 

proposed rule change was published for 

comment in the Federal Register on 

April 16, 2010.3 The Commission 

received three comment letters on the 

proposed rule change.4 The Exchange 

submitted one letter in response to these 

comment letters.5

This order approves the proposed rule 

change. 

II. Description of the Proposed Rule 

Change 

In June 2009, the Exchange launched 

Phlx XL II, an electronic trading 

platform on which all options on the 

Exchange are currently traded.6 In 

conjunction with the launch and rollout 

of the Phlx XL II system, the Exchange 

developed the Top of Phlx Options 

direct data feed (‘‘TOPO’’),7 which 

provides to subscribers the Exchange’s 

best bid and offer position, with 

aggregate size, based on displayable 

order and quoting interest on the Phlx 

XL II system. 

In October 2009, the Exchange made 

the TOPO Plus Orders data feed 

available to all market participants for 

free.8 According to the Exchange, TOPO 

Plus Orders provides disseminated 

Exchange top-of-market data (including 

orders, quotes and trades) together with 

all information that is included in SOF, 

the Exchange’s real-time full limit order 

book data feed. When it established 

TOPO Plus Orders, the Exchange stated 

that it planned to submit a proposed 

rule change to the Commission in order 

to implement fees for the use of TOPO 

Plus Orders. 

SOF is currently available to any 

Exchange quoting participant (i.e., 

specialists, Streaming Quote Traders, 

and Remote Streaming Quote Traders 

(collectively, ‘‘users’’)) and is available 

to users on an issue-by-issue basis at the 

user’s request. A user does not have to 

be assigned in an issue for the Exchange 

to provide SOF to such user in that 

issue. The SOF provides real-time 

information to keep track of the single 

order book(s), single and complex 

orders, complex strategy and Live 

Auction for all symbols for which the 

user is configured. Users may be 

configured for one or more symbols. 

SOF provides real-time data for the 

entire book to its users. It is a 

compilation of limit order data resident 

in the Exchange’s limit order book for 

options traded on the Exchange that the 

Exchange provides through a real-time 

data feed. The Exchange updates SOF 

information upon receipt of each 

displayed limit order. For every limit 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Notices 31831 

9 Internal Distributors of TOPO are currently 

charged a monthly fee of $2,000 per organization. 

This fee would continue to apply to Internal 

Distributors that distribute the TOPO feed. 

10SOF users do not distribute SOF to any external 

users. Therefore, the Exchange would assess the 

lesser fee applicable to internal distributors of 

TOPO Plus Orders on SOF users that have not 

migrated as of June 1, 2010. 

11External Distributors of TOPO are currently 

charged a monthly fee of $2,500 per organization. 

This fee would continue to apply to External 

Distributors that distribute the TOPO feed. 

12A ‘‘subscriber’’ is a person or entity to whom 

the External Distributor provides the TOPO Plus 

Orders data feed. 

13A Non-Professional Subscriber is a natural 

person who is neither: (i) 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; (ii) 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 (iii) 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. 

14A Professional Subscriber is any subscriber that 

is not a Non-Professional Subscriber. If the 

NASDAQ OMX PHLX distributor agreement is 

signed in the name of a business or commercial 

entity, such entity would be considered a 

Professional Subscriber. 

15 In addition to the issues discussed here, the 

Commission notes the comment letters raise 

additional issues that are not pertinent or 

applicable to the subject matter of the current 

proposed rule change, and which are not discussed 

in this order. 

16See Lempert Letter at 2–3; Sullivan Letter at 1; 

see also Waber Letter at 1–2. 

17See Securities Exchange Act Release No. 59039 

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

2008) (SR–NYSEArca–2006–21) (‘‘NYSE Arca 

Order’’). 

18See Lempert Letter at 2. 

19 Id. at 3. 

20See Phlx Letter at 2 (citing the NYSE Arca 

Order). 

21 Id. at 2. 

22 Id. at 2–3. 

price, the SOF includes the aggregate 

order volume. 

The Exchange anticipates that it will 

generally phase out SOF as of June 1, 

2010, and instead offer only TOPO Plus 

Orders to participants that wish to 

continue to receive the data currently 

included in SOF. Thus, current SOF 

users must migrate to TOPO Plus Orders 

by June 1, 2010. The Exchange 

recognizes, however, that some SOF 

users may encounter issues beyond their 

control that render them unable to 

migrate from SOF to the TOPO Plus 

Orders feed on or before that date. 

Accordingly, the Exchange would make 

SOF available for a period of time after 

June 1, 2010 to current SOF users that 

have not migrated to TOPO Plus Orders. 

In the event that an SOF user is unable 

to migrate to TOPO Plus Orders due to 

circumstances beyond their control, by 

June 1, 2010, the Exchange would apply 

the same monthly fee applicable to 

TOPO Plus Orders users that are 

Internal Distributors (as defined below) 

to such SOF users. Once a user has 

migrated from SOF to TOPO Plus 

Orders, they would not have the option 

of reverting to SOF. New subscribers 

currently do not have, and would not be 

given, the option to use SOF. New 

subscribers must subscribe to TOPO 

Plus Orders to receive the market data 

feed. 

The Exchange proposes to charge 

monthly fees to distributors for use of 

TOPO Plus Orders. The amount of the 

monthly distributor fee would depend 

on whether the distributor is an 

‘‘Internal Distributor’’ or an ‘‘External 

Distributor.’’ The Exchange’s fee 

schedule currently reflects that a 

‘‘distributor’’ of NASDAQ OMX PHLX 

data is any entity that receives a feed or 

data file of data directly from NASDAQ 

OMX PHLX or indirectly through 

another entity and then distributes it 

either internally (within that entity) or 

externally (outside that entity), and that 

all distributors would be required to 

execute a NASDAQ OMX PHLX 

distributor agreement. 

An Internal Distributor is an 

organization that subscribes to the 

Exchange for the use of TOPO or TOPO 

Plus Orders, and is permitted by 

agreement with the Exchange to provide 

TOPO or TOPO Plus Orders data to 

internal users (i.e., users within their 

own organization). Under the proposal, 

Internal Distributors of TOPO Plus 

Orders would be charged a monthly fee 

of $4,000 per organization.9 This charge 

would also apply to SOF users that have 

not migrated to TOPO Plus Orders on or 

before June 1, 2010.10

An External Distributor is an 

organization that subscribes to the 

Exchange for the use of TOPO Plus 

Orders, and is permitted by agreement 

with the Exchange to provide TOPO 

Plus Orders data to both internal users 

and to external users (i.e., users outside 

of their own organization). External 

Distributors would be charged a 

monthly fee of $5,000 per 

organization.11

The Exchange also proposes to assess 

a monthly Subscriber Fee 12 on External 

Distributors of TOPO Plus Orders. The 

monthly Subscriber Fee would be 

assessed on a per-subscriber basis 

depending upon whether the subscriber 

is a Non-Professional Subscriber 13 or a 

Professional Subscriber.14 The monthly 

Subscriber Fee assessed to External 

Distributors would be $1 per NonProfessional Subscriber. The monthly 

Subscriber Fee assessed to External 

Distributors would be $20 per 

Professional Subscriber. The Monthly 

Subscriber Fee would also apply to SOF 

users that have not migrated to TOPO 

Plus Orders on or before June 1, 2010. 

III. Summary of Comments and Phlx’s 

Response 

The commenters argue that, contrary 

to the Exchange’s claim in the Notice, at 

least some of the information contained 

in TOPO Plus should not qualify as 

‘‘non-core.’’ In addition, the commenters 

argue that the proposed fees for TOPO 

Plus are not fair and reasonable.15

A. Core Data vs. Non-Core Data 

The commenters argue that the TOPO 

Plus Order feed should not be 

considered non-core data, but instead 

that portions of it (e.g., single and 

complex order book, and Live Auction 

data) should be viewed as core data.16

For example, the Lempert Letter states 

that TOPO Plus epitomizes the type of 

essential data that should be included in 

core data, and believes that Phlx’s 

TOPO Plus is distinguishable from other 

data products approved by the 

Commission 17 because the SOF portion 

of TOPO Plus is critical information not 

available anywhere else.18 In addition, 

the Lempert Letter states that the 

complex order book should be classified 

as core data because ‘‘customers have an 

expectation that those orders are 

displayed to all market participants in a 

transparent manner just as single option 

orders must be disseminated to 

OPRA.’’ 19

Phlx disagrees and states in its 

response letter that the Commission has 

defined ‘‘core data’’ as ‘‘the best priced 

quotations and comprehensive last sale 

reports of all market data,’’ which is 

reported to OPRA and then 

disseminated to the market place as a 

whole.20 Phlx states that non-core data 

is defined as anything other than core 

data that an exchange produces on a 

voluntary basis, such as depth-of-market 

data, and notes that data such as TOPO 

Plus is not required to be produced by 

Phlx.21 The Exchange also notes that, 

while it provides last sale data regarding 

complex orders to OPRA as core data 

pursuant to the requirements of the 

OPRA Plan, it does not provide top of 

the complex order book data to the 

OPRA Plan because OPRA does not 

currently support such order types and 

the OPRA Plan explains that such 

information should not be reported to 

OPRA.22


srobinson on DSKHWCL6B1PROD with NOTICES
31832 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Notices 

23See Lempert Letter at 3; see also Sullivan Letter 

at 1 and Waber Letter at 1–2. 

24See Lempert Letter at 3–4. 

25See Phlx Letter at 3. 

26 Id. at 4. 

27 Id. 

28 Id. at 4. 

29 In approving this proposed rule change, the 

Commission has considered the proposed rule’s 

impact on efficiency, competition, and capital 

formation. See 15 U.S.C. 78c(f). 

30 15 U.S.C. 78f(b)(4). 

31 15 U.S.C. 78f(b)(5). 

32 15 U.S.C. 78f(b)(8). 

33See NYSE Arca Order, supra note 17. 

34 Id. at 74771. 

35 Id. 

36 Id. at 74782. 

37 Id. at 74781. 

38 Id. at 74779. 

39See Plan for Reporting of Consolidated Options 

Last Sale Reports and Quotation Information 

(‘‘OPRA Plan’’), Sections V(a)–(c). 

40See NYSE Arca Order at 74779. 

41 Id. 

42 Id. 

B. Fees and Costs 

The commenters also argue that the 

proposed fees are not fair and 

reasonable, and believe that the 

proposed fees discriminate against 

smaller broker-dealers because they 

would charge the same amount per 

broker-dealer regardless of the quantity 

of issues traded.23 In addition, one 

commenter also expresses concern 

regarding the cost for broker-dealers of 

acquiring the technology necessary if 

they opt to receive the TOPO Plus raw 

data stream.24

In its response letter, Phlx contends 

that its TOPO Plus fees represent an 

equitable allocation of reasonable dues, 

fees and other charges among its 

members and issuers and other persons 

using its facilities.25 Phlx states that the 

commenters in the Sullivan and 

Lempert Letters would be considered 

Internal Distributors, and thereby 

subject to the $4,000 fee, only if they 

choose to receive a raw data feed from 

Phlx or any other vendor where the 

subscriber can interact with data in its 

raw form.26 In the Phlx Letter, the 

Exchange states that, based ‘‘upon the 

use of TOPO Plus by [the commenters] 

and the manner in which External 

Distributors would distribute TOPO 

Plus to them, Phlx concludes that [they] 

are neither Internal Distributors nor 

External Distributors of TOPO Plus,’’ 

and therefore not subject to the monthly 

$4,000 (for Internal Distributors) or 

$5,000 (for External Distributors) in 

monthly fees.27 Instead, Phlx believes 

they would be Professional Subscribers 

and subject to the fees charged them by 

the External Distributor from which 

they receive the feed. Such External 

Distributor would be assessed a $20 

monthly fee for each of its Professional 

Subscribers, which Phlx believes would 

likely be passed through to subscribers, 

along with any other fees agreed upon 

by such External Distributor and its 

subscribers.28

IV. Discussion and Commission 

Findings 

After careful review, the Commission 

finds that the proposal is consistent 

with the requirements of the Act and the 

rules and regulations thereunder 

applicable to a national securities 

exchange.29 In particular, the 

Commission finds that the proposed 

rule change is consistent with the 

requirements of Section 6(b)(4) of the 

Act,30 which requires that the rules of 

a national securities exchange provide 

for the equitable allocation of reasonable 

dues, fees and other charges among 

members and issuers and other persons 

using its facilities. The Commission also 

believes that the proposed rule change 

is consistent with Section 6(b)(5) of the 

Act,31 which requires, among other 

things, that the rules of an exchange be 

designed to promote just and equitable 

principles of trade, to foster cooperation 

and coordination with persons engaged 

in regulating, clearing, settling, 

processing information with respect to, 

and facilitating transactions in 

securities, 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 further believes that the 

proposed rule change is consistent with 

Section 6(b)(8) of the Act,32 in that it 

does not impose any burden on 

competition not necessary or 

appropriate in furtherance of the 

purposes of the Act. 

The Commission has reviewed the 

proposal using the approach set forth in 

the NYSE Arca Order for non-core 

market data fees.33 There, the 

Commission stated that ‘‘core’’ data 

related to data ‘‘that Commission rules 

require to be consolidated and 

distributed to the public by a single 

central processor’’ whereas ‘‘no 

Commission rule requires exchange or 

market participants either to distribute 

non-core data to the public or to display 

non-core data to investors.’’ 34 In the 

NYSE Arca Order, the Commission also 

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.’’ 35 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.’’ 36 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.’’ 37

As noted in the NYSE Arca Order, the 

standards in Section 6 of the Act do not 

differentiate between types of data and 

therefore apply to exchange proposals to 

distribute both core data and non-core 

data.38 All U.S. options exchanges are 

required pursuant to the OPRA Plan to 

provide core data—the best-priced 

quotations and comprehensive last sale 

reports—to OPRA, which data is then 

distributed to the public pursuant to the 

OPRA Plan.39 In contrast, individual 

exchanges and other market participants 

distribute non-core data voluntarily.40

The mandatory nature of the core data 

disclosure regime leaves little room for 

competitive forces to determine 

products and fees.41 Non-core data 

products and their fees are, by contrast, 

much more sensitive to competitive 

forces. The Commission therefore is able 

to rely on competitive forces in its 

determination of whether an exchange’s 

proposal to distribute non-core data 

meets the standards of Section 6.42

The Commission agrees with Phlx 

that, contrary to the commenters’ 

assertions, the Exchange’s instant 

proposal relates to the distribution of 

non-core data. The Commission will, 

therefore, apply the market-based 

approach set forth in the NYSE Arca 

Order. Pursuant to this approach, the 

first step is to determine whether Phlx 

was subject to significant competitive 

forces in setting the terms of its noncore market data proposal, including the 

level of any fees. As in the 

Commission’s NYSE Arca Order, in 

determining whether Phlx was subject 

to significant competitive forces in 

setting the terms of its proposal, the 

Commission has analyzed Phlx’s need 

to attract order flow from market 

participants, and the availability to 

market participants of alternatives to 

purchasing Phlx’s non-core market data. 

The Commission believes that the 

options industry is currently subject to 


srobinson on DSKHWCL6B1PROD with NOTICES
Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Notices 31833 

43The Commission has previously stated that the 

options industry is subject to significant 

competitive forces. See Securities Exchange Act 

Release No. 59949 (May 20, 2009), 74 FR 25593 

(May 28, 2009) (SR–ISE–2007–97) (order approving 

the International Stock Exchange’s proposal 

establishing fees for a real-time depth of market 

data offering). 44See, generally, Concept Release: Competitive 

Developments in the Options Markets, Securities 

Exchange Act Release No. 49175 (date), 69 FR 6124 

(February 9, 2004); see also Battalio, Robert, Hatch, 

Brian, and Jennings, Robert, Toward a National 

Market System for U.S. Exchange-Listed Equity 

Options, The Journal of Finance 59 (933–961); De 

Fontnouvelle, Patrick, Fishe, Raymond P., and 

Harris, Jeffrey H., The Behavior of Bid-Ask Spreads 

and Volume in Options Markets During the 

Competition for Listings in 1999, The Journal of 

Finance 58 (2437–2463); and Mayhew, Stewart, 

Competition, Market Structure, and Bid-Ask 

Spreads in Stock Option Markets, The Journal of 

Finance 57 (931–958). 

45See, e.g., Securities Exchange Act Release Nos. 

55162 (January 24, 2007), 72 FR 4738 (February 1, 

2007) (SR–Amex–2006–106); 55073 (January 9, 

2007), 72 FR 4741 (February 1, 2007) (SR–BSE– 

2006–48); 55154 (January 23, 2007), 72 FR 4743 

(February 1, 2007) (SR–CBOE–2006–92); 55161 

(January 24, 2007), 72 FR 4754 (February 1, 2007) 

(SR–ISE–2006–62); 55156 (January 23, 2007), 72 FR 

4759 (February 1, 2007) (SR–NYSEArca–2006–73); 

and 55153 (January 23, 2007), 72 FR 4553 (January 

31, 2007) (SR–Phlx–2006–74). 

46 In its filing, Phlx discusses ‘‘the intensity of the 

competition for order flow,’’ and states that ‘‘Phlx 

currently competes with seven other options 

exchanges for order flow’’ and ‘‘the ISE and CBOE 

enjoy close to thirty percent market share of 

volume, followed by NYSE Arca and Phlx at close 

to fifteen percent market share, followed by four 

other exchanges with meaningful market share.’’ See 

Notice at 20025. 

47Phlx states in its filing that ‘‘it has a compelling 

need to attract order flow from market participants 

* * * in order to maintain its share of trading 

volume.’’ Id. 

48Notice at 20025. 

49See NYSE Arca Order at 74784. 

50See NYSE Arca Order at 74783. 

51 Id. 

52 Id. Information on transactions executed on 

Phlx is available through OPRA. 

53For example, ISE and CBOE each enjoy greater 

market shares than Phlx and thus have the ability 

to offer data products that could compete favorably 

with the Exchange’s products. 

54The Commission stated in the NYSE Arca 

Order that broker-dealers are not required to obtain 

depth-of-book order data to meet their duty of best 

execution. See id. at 74788 for a more detailed 

discussion. Likewise, the Commission does not 

view obtaining depth-of-book data as a necessary 

prerequisite to broker-dealers satisfying the duty of 

best execution with respect to the trading of 

standardized options. 

55Phlx notes that TOPO Plus Orders are lower for 

Internal Distributors than for External Distributors. 

Because Internal Distributors are by definition more 

limited in the scope of their distribution of TOPO 

Plus Orders data than External Distributors, it is 

reasonable to expect that Internal Distributors will 

provide TOPO Plus Orders data to a smaller number 

of internal subscribers. Conversely, External 

Distributors can reasonably be expected to 

distribute the TOPO Plus Orders data to a higher 

number of subscribers because they do not have the 

same limitation. See Notice at 20025. 

56The Commission notes that the CTA 

participants’ fees have long provided for a lower fee 

for non-professional subscribers, and that the fees 

approved by the Commission in the NYSE Arca 

Order also provided for lower fees for nonprofessional subscribers. See NYSE Arca Order at 

74772. 

significant competitive forces.43 It is 

generally accepted that the start of widespread multiple listing of options across 

exchanges in August 1999 greatly 

enhanced competition among the 

exchanges.44 The launch of four new 

options exchanges since that time, 

numerous market structure innovations, 

and the start of the options penny 

pilot 45 have all further intensified 

intermarket competition for order flow. 

Phlx currently competes with seven 

other options exchanges for order 

flow.46 Attracting order flow is an 

essential part of Phlx’s competitive 

success.47 If Phlx cannot attract order 

flow to its market, it will not be able to 

execute transactions. If Phlx cannot 

execute transactions on its market, it 

will not generate transaction revenue. If 

Phlx 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. This compelling need 

to attract order flow imposes significant 

pressure on Phlx to act reasonably in 

setting its fees for Phlx market data, 

particularly given that the market 

participants that will pay such fees 

often will be the same market 

participants from whom Phlx must 

attract order flow. These market 

participants include broker-dealers that 

control the handling of a large volume 

of customer and proprietary order flow. 

Given the portability of order flow from 

one exchange 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. 

Phlx also notes that it currently trades 

options on seven proprietary index 

products that are not traded on any 

other exchange. These seven options 

currently represent less than 0.04% of 

Phlx’s total contract volume.48 The 

Commission believes that, given the 

small percentage of Phlx’s total contract 

volume represented by these seven 

products, the inclusion of data on these 

products in the TOPO Plus Orders 

product does not confer market power 

on Phlx to compel market participants 

to purchase the entire Phlx data feed 

and the inclusion of depth-of-book data 

for these products in Phlx’s TOPO Plus 

Orders product does not undermine the 

fact that Phlx is subject to significant 

competitive forces in setting the TOPO 

Plus fees. 

In addition to the need to attract order 

flow, the availability of alternatives to 

Phlx’s TOPO Plus product significantly 

affect the terms on which Phlx can 

distribute this market data.49 In setting 

the fees for its TOPO Plus product, Phlx 

must consider the extent to which 

market participants would choose one 

or more alternatives instead of 

purchasing its data.50 The most basic 

source of information concerning the 

depth generally available at an exchange 

is the complete record of an exchange’s 

transactions that is provided in the core 

data feeds.51 In this respect, the core 

data feeds that include an exchange’s 

own transaction information are a 

significant alternative to the exchange’s 

market data product.52 Further, other 

options exchanges can produce their 

own data products, and thus are sources 

of potential competition for Phlx.53 In 

addition, one or more securities firms 

could act independently and distribute 

their own order data, with or without a 

fee. 

The Commission believes that there 

are a number of alternative sources of 

information that impose significant 

competitive pressures on Phlx in setting 

the terms for distributing its TOPO Plus 

product. The Commission believes that 

the availability of those alternatives, as 

well as Phlx’s compelling need to attract 

order flow, impose significant 

competitive pressure on Phlx to act 

equitably, fairly, and reasonably in 

setting the terms of its proposal.54

Because Phlx 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 the 

terms of the proposal fail to meet the 

applicable requirements of the Act or 

the rules thereunder. An analysis of the 

proposal does not provide such a basis. 

The fees do not unreasonably 

discriminate among types of 

distributors, such as by favoring 

participants in the Phlx market or 

penalizing participants in other 

markets.55 The Commission notes that 

the Exchange will assess on External 

Distributors a monthly subscriber fee of 

$20 per Professional Subscriber, and $1 

per Non-Professional Subscriber. The 

monthly subscriber fees assessed upon 

External Distributors are based upon the 

manner in which the data will 

ultimately be used, i.e., for commercial 

vs. non-commercial purposes.56

As discussed above, the commenters 

also argue that the proposed TOPO Plus 

fees are not fair and reasonable, and that 

the fee amounts discriminate against 

smaller broker-dealers because the 

proposed fees would charge the same 


srobinson on DSKHWCL6B1PROD with NOTICES
31834 Federal Register / Vol. 75, No. 107 / Friday, June 4, 2010 / Notices 

57See supra notes 23–24 and accompanying text. 

58 15 U.S.C. 78f(b)(4), (5), and (8). 

59 15 U.S.C. 78s(b)(2). 

60 17 CFR 200.30–3(a)(12). 

amount per broker-dealer regardless of 

the quantity of issues traded, and 

concern regarding the cost of acquiring 

the technology necessary if they opt to 

receive the TOPO Plus raw data 

stream.57 The Commission believes that, 

in the Phlx Letter, the Exchange 

addressed the commenters’ concerns in 

clarifying that the Exchange would only 

consider them to be Internal Distributors 

(and thus subject to a $4,000 monthly 

fee) if they opt to receive the TOPO Plus 

data as a raw data feed. The Exchange 

noted that the commenters could opt to 

receive TOPO Plus from an External 

Distributor, whereby they would be 

considered Professional Subscribers. In 

such a case, the proposal would charge 

an External Distributor $20 per month 

for each Professional Subscriber to 

whom it distributes the feed and Phlx 

notes that the External Distributor may 

pass through the Professional Subscriber 

fee to its subscribers, along with any 

other fees agreed upon, which should be 

significantly less than the monthly 

distributor fees proposed under the 

proposed rule change. 

Though the Commission notes the 

commenters cost concerns regarding 

receiving the TOPO Plus raw data 

stream, if the commenters choose to 

receive the raw data stream, they would 

be subject to the same technology 

constraints and costs in dealing with the 

data as other market participants. In 

addition, the Commission notes that the 

Exchange has stated that it would make 

the SOF data feed available for those 

current SOF users that may encounter 

issues beyond their control that render 

them unable to migrate to TOPO Plus 

before June 1, 2010. 

V. Conclusion 

For the foregoing reasons, the 

Commission finds that the proposed 

rule change is consistent with the Act 

and the rules and regulations 

thereunder applicable to a national 

securities exchange and, in particular, 

with Section 6(b)(4), (5), and (8) of the 

Act.58

It is therefore ordered, pursuant to 

Section 19(b)(2) of the Act,59 that the 

proposed rule change (SR–Phlx–2010– 

48) is approved. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.60

Florence E. Harmon, 

Deputy Secretary. 

[FR Doc. 2010–13461 Filed 6–3–10; 8:45 am] 

BILLING CODE 8010–01–P 

DEPARTMENT OF TRANSPORTATION 

Federal Railroad Administration 

Adoption of Environmental Impact 

Statement; Availability of an 

Environmental Reevaluation 

AGENCY: Federal Railroad 

Administration (FRA), Department of 

Transportation (DOT). 

ACTION: Adoption and Recirculation of 

Final Environmental Impact Statement 

and Notice of Availability of 

Environmental Reevaluation. 

SUMMARY: FRA is issuing this notice to 

advise the public and interested 

agencies that FRA has decided to adopt 

portions of the Environmental Impact 

Statement (EIS) issued by the Federal 

Transit Administration (FTA) in 2004 

for the construction of the Transbay 

Transit Center (TTC) in San Francisco, 

California, in order to satisfy FRA’s 

National Environmental Policy Act 

obligations related to funding the train 

box element of the TTC. Additionally, 

FRA has made available an 

Environmental Reevaluation of the EIS, 

updating certain relevant sections of the 

environmental analysis and describing 

design modifications to the train box. 

Under applicable Council on 

Environmental Quality (CEQ) 

regulations, FRA may adopt and 

recirculate the FTA’s Final EIS since 

FRA’s proposed action is substantially 

the same as the action covered by the 

FTA’s EIS, and FRA has determined that 

the FTA EIS meets the standard for an 

adequate statement under the CEQ 

Regulations. In addition, under FRA’s 

environmental procedures, FRA is 

required to issue a reevaluation of the 

adequacy, accuracy and validity of a 

final EIS in certain circumstances, 

which the agency has also done for this 

project. 

FOR FURTHER INFORMATION CONTACT: 

Melissa DuMond, Environmental 

Protection Specialist, Federal Railroad 

Administration, 1200 New Jersey Ave., 

SE, MS–20, Washington, DC 20590, 

Telephone: (202) 493–6366. 

SUPPLEMENTARY INFORMATION: The FTA 

and the Transbay Joint Powers 

Authority (‘‘TJPA’’) prepared a joint 

environmental impact statement/ 

environmental impact report for the 

Transbay Terminal/Caltrain Downtown/ 

Extension Redevelopment Project 

(‘‘2004 EIS’’). The 2004 EIS included an 

analysis of the environmental impacts of 

the Caltrain Downtown Extension, the 

establishment of a redevelopment area 

plan, and the construction of the TTC 

on the site of the existing Transbay 

Terminal at First and Mission Streets in 

San Francisco, California. The purpose 

of the project is to improve public 

access to bus and rail services, 

modernize the Transbay Terminal and 

improve service, reduce non-transit 

vehicle usage, alleviate blight, and 

revitalize the Transbay Terminal area. 

The TTC will replace the existing 

Transbay Terminal, which was first 

built in 1939, because the existing 

Terminal does not currently meet 

seismic safety or space utilization 

standards. In addition to the above 

mentioned benefits, the 2004 EIS 

contemplated a future high-speed rail 

system at the TTC in the form of a rail 

box that could accommodate high-speed 

rail trains. On the basis of the 2004 EIS, 

the FTA issued a Record of Decision 

(ROD) in 2005. In response to project 

modifications and refinements, the 

TJPA adopted five addenda to the EIS, 

which are described in the 

Environmental Reevaluation. 

The Transbay Terminal project is 

divided into two construction phases, 

which have been refined through the 

five addenda to the 2004 EIS. Phase 1, 

which relates to the portion of the 2004 

EIS adopted by FRA, includes the 

above-grade portion of the TTC and 

limited below-grade structural support 

work including the train box. Phase 2 

includes the construction of the 

Downtown Extension. Under this 

notice, the FRA is adopting the portions 

of the 2004 EIS dealing with Phase 1 

construction as it directly relates to the 

FRA’s funding of the train box under the 

High-Speed Intercity Passenger Rail 

Program. 

The American Recovery and 

Reinvestment Act (‘‘Recovery Act’’) 

provided $8 billion to the FRA as initial 

funding for the High-Speed Intercity 

Passenger Rail Program. The Secretary 

of Transportation selected the California 

High-Speed Rail Authority (‘‘CHSRA’’) 

to receive up to $2.25 billion from the 

Recovery Act to fund the development 

of high-speed intercity passenger rail 

service in California. As the TTC has 

been demonstrated to be the only 

feasible and practicable site in 

downtown San Francisco for the 

northern terminus of the California 

high-speed rail system, FRA proposes to 

provide up to $400 million of the 

CHSRA Recovery Act funding to the 

TJPA in order to construct the train box 

designed to accommodate the future 

high-speed rail service at the TTC. 

Constructing the train box now results 

in substantial savings over options 

involving later construction of highspeed rail facilities under an already 

completed TTC. 

The CEQ regulations allow Federal 

agencies, such as the FRA, to adopt 


srobinson on DSKHWCL6B1PROD with NOTICES