Federal Register / Vol. 81, No. 20 / Monday, February 1, 2016 / Notices 5143 

24 15 U.S.C. 78f. 

25 15 U.S.C. 78f(b)(5). 

26 15 U.S.C. 78s(b)(3)(A). 

27 17 CFR 240.19b–4(f)(2). 

28 15 U.S.C. 78s(b)(2)(B). 

29 17 CFR 200.30–3(a)(12). 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

began operations in 2007 and obtained 

exchange status in 2010. 

In determining the proposed changes 

to the fees for NYSE MKT Integrated 

Feed, the Exchange considered the 

competitiveness of the market for 

proprietary data and all of the 

implications of that competition. The 

Exchange believes that it has considered 

all relevant factors and has not 

considered irrelevant factors in order to 

establish fair, reasonable, and not 

unreasonably discriminatory fees and an 

equitable allocation of fees among all 

users. The existence of numerous 

alternatives to the Exchange’s products, 

including proprietary data from other 

sources, ensures that the Exchange 

cannot set unreasonable fees, or fees 

that are unreasonably discriminatory, 

when vendors and subscribers can elect 

these alternatives or choose not to 

purchase a specific proprietary data 

product if the attendant fees are not 

justified by the returns that any 

particular vendor or data recipient 

would achieve through the purchase. 

Finally, the Exchange believes that 

the proposed rule change, with respect 

to the removal of text from the Fee 

Schedule, is consistent with the 

provisions of Section 6 of the Act,24 in 

general, and with Section 6(b)(5) of the 

Act 25 in particular, in that the proposal 

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 

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. Specifically, NYSE MKT 

believes that the change will promote 

these goals by providing clarity and 

consistency to the Fee Schedule and 

will benefit participants as they would 

be informed to the pricing applicable for 

NYSE MKT Integrated Feed. 

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 foregoing rule change is effective 

upon filing pursuant to Section 

19(b)(3)(A) 26 of the Act and 

subparagraph (f)(2) of Rule 19b–4 27

thereunder, because it establishes a due, 

fee, or other charge imposed by the 

Exchange. 

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission summarily may 

temporarily suspend 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. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under Section 19(b)(2)(B) 28 of the Act to 

determine whether the proposed rule 

change 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– 

NYSEMKT–2016–11 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSEMKT–2016–11. 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 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 

10:00 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; 

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– 

NYSEMKT–2016–11 and should be 

submitted on or before February 22, 

2016. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.29

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2016–01715 Filed 1–29–16; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–76972; File No. SR–NYSE– 

2016–08] 

Self-Regulatory Organizations; New 

York Stock Exchange LLC; Notice of 

Filing and Immediate Effectiveness of 

a Proposed Rule Change Amending 

the Fees for NYSE Order Imbalances 

and NYSE Alerts 

January 26, 2016. 

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

Securities Exchange Act of 1934 (the 

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

notice is hereby given that, on January 

13, 2016, New York Stock Exchange 

LLC (‘‘NYSE’’ or the ‘‘Exchange’’) filed 

with the Securities and Exchange 

Commission (the ‘‘Commission’’) the 

proposed rule change as described in 

Items I, II, and III below, which Items 

have been prepared by the selfregulatory organization. The 

Commission is publishing this notice to 

solicit comments on the proposed rule 

change from interested persons. 


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4See Securities Exchange Act Release Nos. 59543 

(March 9, 2009), 74 FR 11159 (March 16, 2009) (SR– 

NYSE–2008–132), 72923 (Aug. 26, 2014), 79 FR 

52079 (Sept. 2, 2014) (SR–NYSE–2014–43) (‘‘2014 

Non-Display Filing’’) and 73994 (Jan. 6, 2015), 80 

FR 1554 (Jan. 12, 2015) (SR–NYSE–2014–77). 

5See Securities Exchange Act Release No. 50844 

(Dec. 13, 2004), 69 FR 76806 (Dec. 22, 2004) (SR– 

NYSE–2004–53). 

6The text of footnote 6 in Exhibit 5 of this 

proposed rule change was previously filed under a 

separate filing. See SR–NYSE–2016–02 (Proposed 

Rule Change to Amend the Fees for NYSE 

OpenBook). 

7 Data vendors currently report a unique Vendor 

Account Number for each location at which they 

provide a data feed to a data recipient. The 

Exchange considers each Vendor Account Number 

a location. For example, if a data recipient has five 

Vendor Account Numbers, representing five 

locations, for the receipt of the Order Imbalance 

Data Feed product, that data recipient will pay the 

Multiple Data Feed fee with respect to three of the 

five locations. 

8 ‘‘Redistributor’’ means a vendor or any other 

person that provides an NYSE data product to a 

data recipient or to any system that a data recipient 

uses, irrespective of the means of transmission or 

access. 9See Securities Exchange Act Release No. 59544 

(Mar. 9, 2009), 74 FR 11162 (March 16, 2009) (SR– 

NYSE–2008–131). 

10To be approved for Managed Non-Display 

Services, a Redistributor must manage and control 

the access to NYSE Order Imbalances for data 

recipients’ non-display applications and not allow 

for further internal distribution or external 

redistribution of the information by data recipients. 

In addition, the Redistributor is required to (a) host 

the data recipients’ non-display applications in 

equipment located in the Redistributor’s data center 

and/or hosted space/cage and (b) offer NYSE Order 

Imbalances in the Redistributor’s own messaging 

formats (rather than using raw NYSE message 

formats) by reformatting and/or altering NYSE 

Order Imbalances prior to retransmission without 

affecting the integrity of NYSE Order Imbalances 

and without rendering NYSE Order Imbalances 

inaccurate, unfair, uninformative, fictitious, 

misleading or discriminatory. 

11See Fee Schedule. 

12 In order to harmonize its approach to fees for 

its market data products, the Exchange is 

simultaneously proposing to remove fees related to 

Managed Non-Display Services for NYSE BBO, 

NYSE Trades, and NYSE OpenBook. See SR– 

NYSE–2016–03 and SR–NYSE–2016–02. The fees 

applicable to NYSE Integrated market data product 

effective as of January 4, 2016 do not include 

Managed Non-Display Services fees. 

13See Securities Exchange Act Release No. 59544 

(Mar. 9, 2009), 74 FR 11162 (March 16, 2009) (SR– 

NYSE–2008–131), at 11163. 

14See SR–NYSE–2016–02. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend the 

fees for NYSE Order Imbalances and 

NYSE Alerts to establish a multiple data 

feed fee. The Exchange also proposes to 

amend the fees for the NYSE Order 

Imbalances to discontinue fees relating 

to managed non-display. The proposed 

rule change is available on the 

Exchange’s Web site at www.nyse.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 

self-regulatory organization included 

statements concerning the purpose of, 

and basis for, the proposed rule change 

and discussed any comments it received 

on the proposed rule change. The text 

of those statements may be examined at 

the places specified in Item IV below. 

The Exchange has prepared summaries, 

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

of the most significant parts of such 

statements. 

A. Self-Regulatory Organization’s 

Statement of the Purpose of, and the 

Statutory Basis for, the Proposed Rule 

Change 

1. Purpose 

The Exchange proposes to amend the 

fees for NYSE Order Imbalances 4 and 

for NYSE Alerts,5 as set forth on the 

NYSE Proprietary Market Data Fee 

Schedule (‘‘Fee Schedule’’). The 

Exchange proposes to make the 

following fee changes: 

• Establish a multiple data feed fee 

for NYSE Order Imbalances and for 

NYSE Alerts; and 

• Discontinue fees relating to 

managed non-display for NYSE Order 

Imbalances. 

Multiple Data Feed Fee for NYSE Order 

Imbalances and NYSE Alerts 6

The Exchange proposes to establish a 

new monthly fee, the ‘‘Multiple Data 

Feed Fee,’’ that would apply to data 

recipients that take a data feed for a 

market data product in more than two 

locations. Data recipients taking NYSE 

Order Imbalances and NYSE Alerts in 

more than two locations would be 

charged $200 per product per additional 

location per month. No new reporting 

would be required.7

Managed Non-Display Fees for NYSE 

Order Imbalances 

Non-Display Use of NYSE market data 

means accessing, processing, or 

consuming NYSE market data delivered 

via direct and/or Redistributor 8 data 

feeds for a purpose other than in 

support of a data recipient’s display 

usage or further internal or external 

redistribution.9 Managed Non-Display 

Services fees apply when a data 

recipient’s non-display applications are 

hosted by a Redistributor that has been 

approved for Managed Non-Display 

Services.10 A Redistributor approved for 

Managed Non-Display Services manages 

and controls the access to NYSE Order 

Imbalances and does not allow for 

further internal distribution or external 

redistribution of NYSE Order 

Imbalances by the data recipients. A 

Redistributor approved for Managed 

Non-Display Services is required to 

report to NYSE on a monthly basis the 

data recipients that are receiving NYSE 

market data through the Redistributor’s 

managed non-display service and the 

real-time NYSE market data products 

that such data recipients are receiving 

through such service. Recipients of data 

through Managed Non-Display Service 

have no additional reporting 

requirements. Data recipients that 

receive NYSE Order Imbalances from an 

approved Redistributor of Managed 

Non-Display Services are charged an 

access fee of $250 per month and a 

Managed Non-Display Services Fee of 

$200 per month, for a total fee of $450 

per month. 

The Exchange proposes to 

discontinue the fees related to Managed 

Non-Display Services because of the 

limited number of Redistributors that 

have qualified for Managed Non-Display 

Services and the administrative burdens 

associated with the program in light of 

the limited number of Redistributors 

that have qualified for Managed NonDisplay Services. As proposed, all data 

recipients currently using NYSE Order 

Imbalances on a managed non-display 

basis would continue to be subject to an 

access fee of $500 per month, and the 

same non-display services fees,11 as 

other data recipients.12

Modification of the Application of the 

Access Fee for NYSE Order Imbalances 

Data recipients that subscribe to 

NYSE Order Imbalances are currently 

charged an access fee of $500 per 

month. The Exchange currently charges 

an access fee of $5,000 per month to 

each NYSE OpenBook data feed 

recipient. The access fee for NYSE 

OpenBook allows recipients of NYSE 

OpenBook to also receive NYSE Order 

Imbalances and NYSE BBO without 

separately paying additional access fees 

for these products.13 The Exchange is 

not proposing any change to the access 

fee currently payable for NYSE Order 

Imbalances. The Exchange notes, 

however, that pursuant to a proposed 

rule change filed separately, recipients 

of NYSE OpenBook will no longer 

receive NYSE Order Imbalances or 

NYSE BBO without paying a separate 

access fee for each of these products.14

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 


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

16 15 U.S.C. 78f(b)(4), (5). 

17See Securities Exchange Act Release No. 70010 

(July 19, 2013), 78 FR 44984 (July 25, 2013) (SR– 

CTA/CQ–2013–04). 

18See ‘‘Direct Access Fee,’’ Options Price 

Reporting Authority Fee Schedule Fee Schedule 

PRA Plan [sic] at http://www.opradata.com/pdf/

fee_schedule.pdf. 

19See Securities Exchange Act Release No. 69278 

(April 2, 2013), 78 FR 20973 (April 8, 2013) (SR– 

NYSE–2013–25). 

20See Securities Exchange Act Release No .72923 

(Aug. 26, 2014), 79 FR 52079 (Sept. 2, 2014) (SR– 

NYSE–2014–43). 

21See, e.g., Proposing Release on Regulation of 

NMS Stock Alternative Trading Systems, Securities 

Exchange Act Release No. 76474 (Nov. 18, 2015) 

(File No. S7–23–15). See also, ‘‘Brokers Warned Not 

to Steer Clients’ Stock Trades Into Slow Lane,’’ 

Bloomberg Business, December 14, 2015 (Sigma X 

dark pool to use direct exchange feeds as the 

primary source of price data). 

22NetCoalition, 615 F.3d at 535. 

the provisions of section 6 of the Act,15

in general, and sections 6(b)(4) and 

6(b)(5) of the Act,16 in particular, in that 

it provides an equitable allocation of 

reasonable fees among users and 

recipients of the data and is not 

designed to permit unfair 

discrimination among customers, 

issuers, and brokers. 

The fees are also equitable and not 

unfairly discriminatory because they 

will apply to all data recipients that 

choose to subscribe to NYSE Order 

Imbalances and NYSE Alerts. 

Multiple Data Feed Fee for NYSE Order 

Imbalances and NYSE Alerts 

The Exchange believes that it is 

reasonable to require data recipients to 

pay a modest additional fee taking a 

data feed for a market data product in 

more than two locations, because such 

data recipients can derive substantial 

value from being able to consume the 

product in as many locations as they 

want. In addition, there are 

administrative burdens associated with 

tracking each location at which a data 

recipient receives the product. The 

Multiple Data Feed Fee is designed to 

encourage data recipients to better 

manage their requests for additional 

data feeds and to monitor their usage of 

data feeds. The proposed fee is designed 

to apply to data feeds received in more 

than two locations so that each data 

recipient can have one primary and one 

backup data location before having to 

pay a multiple data feed fee. The 

Exchange notes that this pricing is 

consistent with similar pricing adopted 

in 2013 by the Consolidated Tape 

Association (‘‘CTA’’).17 The Exchange 

also notes that the OPRA Plan imposes 

a similar charge of $100 per connection 

for circuit connections in addition to the 

primary and backup connections.18

Managed Non-Display Fees for NYSE 

Order Imbalances 

The Exchange believes that it is 

reasonable to discontinue Managed 

Non-Display Fees. The Exchange 

determined in 2013 that its fee 

structure, which was then based 

primarily on counting both display and 

non-display devices, was no longer 

appropriate in light of market and 

technology developments.19 Since then, 

the Exchange also modified its approach 

to display and non-display fees with 

changes to the fees as reflected in a 2014 

filing.20 Discontinuing the fees 

applicable to Managed Non-Display as 

proposed reflects the Exchange’s 

continuing review and consideration of 

the application of non-display fees, and 

would harmonize and simplify the 

application of Non-Display Use fees by 

applying them consistently to all users. 

In particular, after further experience 

with the application of non-display use 

fees, the Exchange believes that it is 

more equitable and less discriminatory 

to discontinue the distinction for 

Managed Non-Display services because 

all data recipients using data on a nondisplay basis are using it in a 

comparable way and should be subject 

to similar fees regardless of whether or 

not they receive the data directly from 

the Exchange. The Exchange believes 

that applying the same non-display fees 

to all data recipients on the same basis 

better reflects the significant value of 

non-display data to data recipients and 

eliminates what is effectively a discount 

for certain data recipients, and as such 

is not unfairly discriminatory. The 

Exchange believes that the non-display 

fees directly and appropriately reflect 

the significant value of using nondisplay data in a wide range of 

computer-automated functions relating 

to both trading and non-trading 

activities and that the number and range 

of these functions continue to grow 

through innovation and technology 

developments. 

Modifications to Access Fees for NYSE 

Order Imbalances 

The Exchange believes that it is 

reasonable to make the changes 

proposed to the application of access 

fees for NYSE Order Imbalances. 

Specifically, data recipients that take 

the NYSE Order Imbalances, or any 

other data feed, receive value from each 

product they choose to take. A data 

recipient that chooses to take multiple 

products (no recipient is required to 

take any of products [sic], or any 

specific combination of them) uses each 

product in a different way and therefore 

obtains different value from each. 

Applying an access fee to each product 

would bring consistency to the 

Exchange’s application of access fees to 

each product. The Exchange believes 

that each product has a separate and 

distinct value that is appropriate to 

reflect in a separate access fee. Finally, 

the requirement to pay separate access 

fees for each market data product is 

equitable and not unfairly 

discriminatory because it would apply 

to all data recipients and appropriately 

reflects the value of each product to 

those who choose to use them. 

The Exchange notes that NYSE Order 

Imbalances and NYSE Alerts are 

entirely optional. The Exchange is not 

required to make NYSE Order 

Imbalances or NYSE Alerts available or 

to offer any specific pricing alternatives 

to any customers, nor is any firm 

required to purchase NYSE Order 

Imbalances or NYSE Alerts. Firms that 

do purchase these products do so for the 

primary goals of using them to increase 

revenues, reduce expenses, and in some 

instances compete directly with the 

Exchange (including for order flow); 

those firms are able to determine for 

themselves whether these products or 

any other similar products are 

attractively priced or not.21

The decision of the United States 

Court of Appeals for the District of 

Columbia Circuit in NetCoalition v. 

SEC, 615 F.3d 525 (D.C. Cir. 2010), 

upheld reliance by the Securities and 

Exchange Commission (‘‘Commission’’) 

upon the existence of competitive 

market mechanisms to set reasonable 

and equitably allocated fees for 

proprietary market data: 

In fact, the legislative history indicates that 

the Congress intended that the market system 

‘evolve through the interplay of competitive 

forces as unnecessary regulatory restrictions 

are removed’ and that the SEC wield its 

regulatory power ‘in those situations where 

competition may not be sufficient,’ such as 

in the creation of a ‘consolidated 

transactional reporting system.’ 

Id. at 535 (quoting H.R. Rep. No. 94– 

229 at 92 (1975), as reprinted in 1975 

U.S.C.C.A.N. 323). The court agreed 

with the Commission’s conclusion that 

‘‘Congress intended that ‘competitive 

forces should dictate the services and 

practices that constitute the U.S. 

national market system for trading 

equity securities.’ ’’ 22

As explained below in the Exchange’s 

Statement on Burden on Competition, 

the Exchange believes that there is 

substantial evidence of competition in 

the marketplace for proprietary market 


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23The Exchange believes that cost-based pricing 

would be impractical because it would create 

enormous administrative burdens for all parties and 

the Commission to cost-regulate a large number of 

participants and standardize and analyze 

extraordinary amounts of information, accounts, 

and reports. In addition, and as described below, it 

is impossible to regulate market data prices in 

isolation from prices charged by markets for other 

services that are joint products. Cost-based rate 

regulation would also lead to litigation and may 

distort incentives, including those to minimize 

costs and to innovate, leading to further waste. 

Under cost-based pricing, the Commission would 

be burdened with determining a fair rate of return, 

and the industry could experience frequent rate 

increases based on escalating expense levels. Even 

in industries historically subject to utility 

regulation, cost-based ratemaking has been 

discredited. As such, the Exchange believes that 

cost-based ratemaking would be inappropriate for 

proprietary market data and inconsistent with 

Congress’s direction that the Commission use its 

authority to foster the development of the national 

market system, and that market forces will continue 

to provide appropriate pricing discipline. See 

Appendix C to NYSE’s comments to the 

Commission’s 2000 Concept Release on the 

Regulation of Market Information Fees and 

Revenues, which can be found on the Commission’s 

Web site at http://www.sec.gov/rules/concept/

s72899/buck1.htm. 

24Press Release, U.S. Department of Justice, 

Assistant Attorney General Christine Varney Holds 

Conference Call Regarding NASDAQ OMX Group 

Inc. and IntercontinentalExchange Inc. Abandoning 

Their Bid for NYSE Euronext (May 16, 2011), 

available at http://www.justice.gov/iso/opa/atr/

speeches/2011/at-speech-110516.html; see also 

Complaint in U.S. v. Deutsche Borse AG and NYSE 

Euronext, Case No. 11–cv–2280 (D.C. Dist.) ¶ 24 

(‘‘NYSE and Direct Edge compete head-to-head . . . 

in the provision of real-time proprietary equity data 

products.’’). 

25Concept Release on Equity Market Structure, 

Securities Exchange Act Release No. 61358 (Jan. 14, 

2010), 75 FR 3594 (Jan. 21, 2010) (File No. S7–02– 

10). This Concept Release included data from the 

third quarter of 2009 showing that no market center 

traded more than 20% of the volume of listed 

stocks, further evidencing the dispersal of and 

competition for trading activity. Id. at 3598. Data 

available on ArcaVision show that from June 30, 

2013 to June 30, 2014, no exchange traded more 

than 12% of the volume of listed stocks by either 

trade or dollar volume, further evidencing the 

continued dispersal of and fierce competition for 

trading activity. See https://www.arcavision.com/

Arcavision/arcalogin.jsp. 

26Mary Jo White, Enhancing Our Equity Market 

Structure, Sandler O’Neill & Partners, L.P. Global 

Exchange and Brokerage Conference (June 5, 2014) 

(available on the Commission Web site), citing 

Tuttle, Laura, 2014, ‘‘OTC Trading: Description of 

Non-ATS OTC Trading in National Market System 

Stocks,’’ at 7–8. 

data and that the Commission can rely 

upon such evidence in concluding that 

the fees established in this filing are the 

product of competition and therefore 

satisfy the relevant statutory standards. 

In addition, the existence of alternatives 

to these data products, such as 

consolidated data and proprietary data 

from other sources, as described below, 

further ensures that the Exchange 

cannot set unreasonable fees, or fees 

that are unreasonably discriminatory, 

when vendors and subscribers can 

select such alternatives. 

As the NetCoalition decision noted, 

the Commission is not required to 

undertake a cost-of-service or 

ratemaking approach. The Exchange 

believes that, even if it were possible as 

a matter of economic theory, cost-based 

pricing for proprietary market data 

would be so complicated that it could 

not be done practically or offer any 

significant benefits.23

For these reasons, the Exchange 

believes that the proposed fees are 

reasonable, equitable, and not unfairly 

discriminatory. 

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. An 

exchange’s ability to price its 

proprietary market data feed products is 

constrained by actual competition for 

the sale of proprietary market data 

products, the joint product nature of 

exchange platforms, and the existence of 

alternatives to the Exchange’s 

proprietary data. 

The Existence of Actual Competition 

The market for proprietary data 

products is currently competitive and 

inherently contestable because there is 

fierce competition for the inputs 

necessary for the creation of proprietary 

data and strict pricing discipline for the 

proprietary products themselves. 

Numerous exchanges compete with one 

another for listings and order flow and 

sales of market data itself, providing 

ample opportunities for entrepreneurs 

who wish to compete in any or all of 

those areas, including producing and 

distributing their own market data. 

Proprietary data products are produced 

and distributed by each individual 

exchange, as well as other entities, in a 

vigorously competitive market. Indeed, 

the U.S. Department of Justice (‘‘DOJ’’) 

(the primary antitrust regulator) has 

expressly acknowledged the aggressive 

actual competition among exchanges, 

including for the sale of proprietary 

market data. In 2011, the DOJ stated that 

exchanges ‘‘compete head to head to 

offer real-time equity data products. 

These data products include the best bid 

and offer of every exchange and 

information on each equity trade, 

including the last sale.’’ 24

Moreover, competitive markets for 

listings, order flow, executions, and 

transaction reports provide pricing 

discipline for the inputs of proprietary 

data products and therefore constrain 

markets from overpricing proprietary 

market data. Broker-dealers send their 

order flow and transaction reports to 

multiple venues, rather than providing 

them all to a single venue, which in turn 

reinforces this competitive constraint. 

As a 2010 Commission Concept Release 

noted, the ‘‘current market structure can 

be described as dispersed and complex’’ 

with ‘‘trading volume . . . dispersed 

among many highly automated trading 

centers that compete for order flow in 

the same stocks’’ and ‘‘trading centers 

offer[ing] a wide range of services that 

are designed to attract different types of 

market participants with varying trading 

needs.’’ 25 More recently, SEC Chair 

Mary Jo White has noted that 

competition for order flow in exchangelisted equities is ‘‘intense’’ and divided 

among many trading venues, including 

exchanges, more than 40 alternative 

trading systems, and more than 250 

broker-dealers.26

If an exchange succeeds in competing 

for quotations, order flow, and trade 

executions, then it earns trading 

revenues and increases the value of its 

proprietary market data products 

because they will contain greater quote 

and trade information. Conversely, if an 

exchange is less successful in attracting 

quotes, order flow, and trade 

executions, then its market data 

products may be less desirable to 

customers in light of the diminished 

content and data products offered by 

competing venues may become more 

attractive. Thus, competition for 

quotations, order flow, and trade 

executions puts significant pressure on 

an exchange to maintain both execution 

and data fees at reasonable levels. 

In addition, in the case of products 

that are also redistributed through 

market data vendors, such as Bloomberg 

and Thompson Reuters, the vendors 

themselves provide additional price 

discipline for proprietary data products 

because they control the primary means 

of access to certain end users. These 

vendors impose price discipline based 

upon their business models. For 

example, vendors that assess a 

surcharge on data they sell are able to 

refuse to offer proprietary products that 

their end users do not or will not 

purchase in sufficient numbers. Vendors 

will not elect to make available NYSE 

Order Imbalances and NYSE Alerts 

unless their customers request them, 

and customers will not elect to pay the 

proposed fees unless these products can 

provide value by sufficiently increasing 

revenues or reducing costs in the 

customer’s business in a manner that 

will offset the fees. All of these factors 

operate as constraints on pricing 

proprietary data products. 


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Federal Register / Vol. 81, No. 20 / Monday, February 1, 2016 / Notices 5147 

27See Securities Exchange Act Release No. 72153 

(May 12, 2014), 79 FR 28575, 28578 n.15 (May 16, 

2014) (SR–NASDAQ–2014–045) (‘‘[A]ll of the 

exchange’s costs are incurred for the unified 

purposes of attracting order flow, executing and/or 

routing orders, and generating and selling data 

about market activity. The total return that an 

exchange earns reflects the revenues it receives 

from the joint products and the total costs of the 

joint products.’’). See also Securities Exchange Act 

Release No. 62907 (Sept. 14, 2010), 75 FR 57314, 

57317 (Sept. 20, 2010) (SR–NASDAQ–2010–110), 

and Securities Exchange Act Release No. 62908 

(Sept. 14, 2010), 75 FR 57321, 57324 (Sept. 20, 

2010) (SR–NASDAQ–2010–111). 

28See generally Mark Hirschey, Fundamentals of 

Managerial Economics, at 600 (2009) (‘‘It is 

important to note, however, that although it is 

possible to determine the separate marginal costs of 

goods produced in variable proportions, it is 

impossible to determine their individual average 

costs. This is because common costs are expenses 

necessary for manufacture of a joint product. 

Common costs of production—raw material and 

equipment costs, management expenses, and other 

overhead—cannot be allocated to each individual 

by-product on any economically sound basis. . . . 

Any allocation of common costs is wrong and 

arbitrary.’’). This is not new economic theory. See, 

e.g., F.W. Taussig, ‘‘A Contribution to the Theory 

of Railway Rates,’’ Quarterly Journal of Economics 

V(4) 438, 465 (July 1891) (‘‘Yet, surely, the division 

is purely arbitrary. These items of cost, in fact, are 

jointly incurred for both sorts of traffic; and I cannot 

share the hope entertained by the statistician of the 

Commission, Professor Henry C. Adams, that we 

shall ever reach a mode of apportionment that will 

lead to trustworthy results.’’). 

29This is simply a securities market-specific 

example of the well-established principle that in 

certain circumstances more sales at lower margins 

can be more profitable than fewer sales at higher 

margins; this example is additional evidence that 

market data is an inherent part of a market’s joint 

platform. 

Joint Product Nature of Exchange 

Platform 

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, proprietary market data and trade 

executions are a paradigmatic example 

of joint products with joint costs. The 

decision of whether and on which 

platform to post an order will depend 

on the attributes of the platforms where 

the order can be posted, including the 

execution fees, data availability and 

quality, and price and distribution of 

data products. Without a platform to 

post quotations, receive orders, and 

execute trades, exchange data products 

would not exist. 

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 platform for 

posting quotes, accepting orders, and 

executing transactions 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, an exchange’s brokerdealer customers generally view the 

costs of transaction executions and 

market data as a unified cost of doing 

business with the exchange. A brokerdealer will only choose to direct orders 

to an exchange if the revenue from the 

transaction exceeds its cost, including 

the cost of any market data that the 

broker-dealer chooses to buy in support 

of its order routing and trading 

decisions. If the costs of the transaction 

are not offset by its value, then the 

broker-dealer may choose instead not to 

purchase the product and trade away 

from that exchange. There is substantial 

evidence of the strong correlation 

between order flow and market data 

purchases. For example, in September 

2015, more than 80% of the transaction 

volume on each of NYSE and NYSE’s 

affiliates NYSE Arca and NYSE MKT 

was executed by market participants 

that purchased one or more proprietary 

market data products (the 20 firms were 

not the same for each market). A supracompetitive increase in the fees for 

either executions or market data would 

create a risk of reducing an exchange’s 

revenues from both products. 

Other market participants have noted 

that proprietary market data and trade 

executions are joint products of a joint 

platform and have common costs.27 The 

Exchange agrees with and adopts those 

discussions and the arguments therein. 

The Exchange also notes that the 

economics literature confirms that there 

is no way to allocate common costs 

between joint products that would shed 

any light on competitive or efficient 

pricing.28

Analyzing the cost of market data 

product production and distribution in 

isolation from the cost of all of the 

inputs supporting the creation of market 

data and market data products will 

inevitably underestimate the cost of the 

data and data products because it is 

impossible to obtain the data inputs to 

create market data products without a 

fast, technologically robust, and wellregulated execution system, and system 

and regulatory costs affect the price of 

both obtaining the market data itself and 

creating and distributing market data 

products. It would be equally 

misleading, however, to attribute all of 

an exchange’s costs to the market data 

portion of an exchange’s joint products. 

Rather, all of an exchange’s costs are 

incurred for the unified purposes of 

attracting order flow, executing and/or 

routing orders, and generating and 

selling data about market activity. The 

total return that an exchange earns 

reflects the revenues it receives from the 

joint products and the total costs of the 

joint products. 

As noted above, the level of 

competition and contestability in the 

market is evident in the numerous 

alternative venues that compete for 

order flow, including 11 equities selfregulatory organization (‘‘SRO’’) 

markets, as well as various forms of 

alternative trading systems (‘‘ATSs’’), 

including dark pools and electronic 

communication networks (‘‘ECNs’’), and 

internalizing broker-dealers. SRO 

markets compete to attract order flow 

and produce transaction reports via 

trade executions, and two FINRAregulated Trade Reporting Facilities 

compete to attract transaction reports 

from the non-SRO venues. 

Competition among trading platforms 

can be expected to constrain the 

aggregate return that each platform 

earns from the sale of its joint products, 

but different trading platforms may 

choose from a range of possible, and 

equally reasonable, pricing strategies as 

the means of recovering total costs. For 

example, some platforms may choose to 

pay rebates to attract orders, charge 

relatively low prices for market data 

products (or provide market data 

products free of charge), and charge 

relatively high prices for accessing 

posted liquidity. Other platforms may 

choose a strategy of paying lower 

rebates (or no rebates) to attract orders, 

setting relatively high prices for market 

data products, and setting relatively low 

prices for accessing posted liquidity. For 

example, BATS Global Markets 

(‘‘BATS’’) and Direct Edge, which 

previously operated as ATSs and 

obtained exchange status in 2008 and 

2010, respectively, provided certain 

market data at no charge on their Web 

sites in order to attract more order flow, 

and used revenue rebates from resulting 

additional executions to maintain low 

execution charges for their users.29 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. 

Existence of Alternatives 

The large number of SROs, ATSs, and 

internalizing broker-dealers that 

currently produce proprietary data or 

are currently capable of producing it 

provides further pricing discipline for 

proprietary data products. Each SRO, 

ATS, and broker-dealer is currently 

permitted to produce and sell 

proprietary data products, and many 

currently do, including but not limited 

to the Exchange, NYSE MKT, NYSE 


rmajette on DSK2TPTVN1PROD with NOTICES
5148 Federal Register / Vol. 81, No. 20 / Monday, February 1, 2016 / Notices 

30 15 U.S.C. 78s(b)(3)(A). 

31 17 CFR 240.19b–4(f)(2). 

32 15 U.S.C. 78s(b)(2)(B). 33 17 CFR 200.30–3(a)(12). 

Arca, NASDAQ OMX, BATS, and Direct 

Edge. 

The fact that proprietary data from 

ATSs, internalizing broker-dealers, and 

vendors can bypass SROs is significant 

in two respects. First, non-SROs can 

compete directly with SROs for the 

production and sale of proprietary data 

products. By way of example, BATS and 

NYSE Arca both published proprietary 

data on the Internet before registering as 

exchanges. Second, because a single 

order or transaction report can appear in 

an SRO proprietary product, a non-SRO 

proprietary product, or both, the amount 

of data available via proprietary 

products is greater in size than the 

actual number of orders and transaction 

reports that exist in the marketplace. 

Because market data users can find 

suitable substitutes for most proprietary 

market data products, a market that 

overprices its market data products 

stands a high risk that users may 

substitute another source of market data 

information for its own. 

Those competitive pressures imposed 

by available alternatives are evident in 

the Exchange’s proposed pricing. 

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 and inexpensive. 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, 

TrackECN, BATS Trading and Direct 

Edge. As noted above, BATS launched 

as an ATS in 2006 and became an 

exchange in 2008, while Direct Edge 

began operations in 2007 and obtained 

exchange status in 2010. 

In determining the proposed change 

to the fees for NYSE Order Imbalances 

and NYSE Alerts, the Exchange 

considered the competitiveness of the 

market for proprietary data and all of 

the implications of that competition. 

The Exchange believes that it has 

considered all relevant factors and has 

not considered irrelevant factors in 

order to establish fair, reasonable, and 

not unreasonably discriminatory fees 

and an equitable allocation of fees 

among all users. The existence of 

numerous alternatives to the Exchange’s 

products, including proprietary data 

from other sources, ensures that the 

Exchange cannot set unreasonable fees, 

or fees that are unreasonably 

discriminatory, when vendors and 

subscribers can elect these alternatives 

or choose not to purchase a specific 

proprietary data product if the attendant 

fees are not justified by the returns that 

any particular vendor or data recipient 

would achieve through the purchase. 

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 foregoing rule change is effective 

upon filing pursuant to section 

19(b)(3)(A) 30 of the Act and 

subparagraph (f)(2) of Rule 19b–4 31

thereunder, because it establishes a due, 

fee, or other charge imposed by the 

Exchange. 

At any time within 60 days of the 

filing of such proposed rule change, the 

Commission summarily may 

temporarily suspend 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. If the 

Commission takes such action, the 

Commission shall institute proceedings 

under section 19(b)(2)(B) 32 of the Act to 

determine whether the proposed rule 

change 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– 

NYSE–2016–08 on the subject line. 

Paper Comments 

• Send paper comments in triplicate 

to Brent J. Fields, Secretary, Securities 

and Exchange Commission, 100 F Street 

NE., Washington, DC 20549–1090. 

All submissions should refer to File 

Number SR–NYSE–2016–08. 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 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 

10:00 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; 

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–NYSE– 

2016–08 and should be submitted on or 

before February 22, 2016. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.33

Robert W. Errett, 

Deputy Secretary. 

[FR Doc. 2016–01712 Filed 1–29–16; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

Proposed Collection; Comment 

Request 

Upon Written Request, Copies Available 

From: Securities and Exchange 

Commission, Office of FOIA Services, 

100 F Street NE., Washington, DC 

20549–2736. 

Extension: 

Rule 17e–1; SEC File No. 270–224, OMB 

Control No. 3235–0217. 

Notice is hereby given that, pursuant 

to the Paperwork Reduction Act of 1995 

(44 U.S.C. 3501 et seq.) (‘‘Paperwork 

Reduction Act’’), the Securities and 

Exchange Commission (the 

‘‘Commission’’) is soliciting comments 

on the collection of information 

summarized below. The Commission 

plans to submit this existing collection 

of information to the Office of 


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