Federal Register / Vol. 81, No. 16 / Tuesday, January 26, 2016 / Notices 4353 

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

2 15 U.S.C. 78a. 

3 17 CFR 240.19b–4. 

4See Securities Exchange Act Release Nos. 62188 

(May 27, 2010), 75 FR 31484 (June 3, 2010) (SR– 

NYSEArca–2010–23); 69315 (April 5, 2013), 78 FR 

21668 (April 11, 2013) (SR–NYSEArca–2013–37) 

(‘‘2013 Non-Display Filing’’); 70213 (Aug. 15, 2013), 

78 FR 51796 (Aug. 21, 2013) (SR–NYSEArca–2013– 

81) (‘‘2013 Arca BBO and Trades Filing’’); 73011 

(Sept. 5, 2014), 79 FR 54315 (Sept. 11, 2014) (SR– 

NYSEARCA–2014–93) (‘‘2014 Non-Display Filing’’); 

and 73998 (Jan. 6, 2015), 80 FR 1549 (Jan. 12, 2015) 

(SR–NYSEArca–2014–148) (‘‘2015 NYSE Arca BBO 

and Trades Filing’’). 

5The Commission notes that, as stated in the 

Exhibit 5, the proposed fee changes were effective 

as of January 11, 2016. 

6The text of footnote 5 in Exhibit 5 of this 

proposed rule change was previously filed under a 

separate filing. See SR–NYSEArca–2016–01 

(Proposed Rule Change to Amend the Fees for 

NYSE ArcaBook). 

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 NYSE Arca BBO 

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 Arca data product to 

a data recipient or to any system that a data 

Continued 

eXtensible Business Reporting Language 

(XBRL). This collection of information 

is located primarily in registration 

statement and report exhibit provisions, 

which require interactive data, and Rule 

405 of Regulation S–T (17 CFR 232.405), 

which specifies how to submit and post 

interactive data. The exhibit provisions 

are in Item 601(b)(101) of Regulation S– 

K (17 CFR 229.601(b)(101)), Form F–10 

under the Securities Act (17 CFR 

239.40) and Forms 20–F, 40–F and 6–K 

under the Exchange Act (17 CFR 

249.220f, 17 CFR 249.240f and 17 CFR 

249.306). 

In interactive data format, financial 

statement information could be 

downloaded directly into spreedsheets 

and analyzed in a variety of ways using 

commercial off-the-shelf software. The 

specified financial information already 

is and will continue to be required to be 

submitted to the Commission in 

traditional format under existing 

requirements. The purpose of the 

interactive data requirement is to make 

financial information easier for 

investors to analyze and assist issuers in 

automating regulatory filings and 

business information processing. We 

estimate that 8601 respondents per year 

will each submit an average of 4.5 

reponses per year for an estimated total 

of 38,705 responses. We further estimate 

an internal burden of 56 hours per 

response for a total annual internal 

burden of 2,167,480 hours (56 hours per 

response × 38,705 responses). 

An agency may not conduct or 

sponsor, and a person is not required to 

respond to, a collection of information 

unless it displays a currently valid 

control number. 

The public may view the background 

documentation for this information 

collection at the following Web site, 

www.reginfo.gov . Comments should be 

directed to: (i) Desk Officer for the 

Securities and Exchange Commission, 

Office of Information and Regulatory 

Affairs, Office of Management and 

Budget, Room 10102, New Executive 

Office Building, Washington, DC 20503, 

or by sending an email to: Shagufta_

Ahmed@omb.eop.gov; and (ii) Pamela 

Dyson, Director/Chief Information 

Officer, Securities and Exchange 

Commission, c/o Remi Pavlik-Simon, 

100 F Street NE., Washington, DC 20549 

or send an email to: PRA_Mailbox@

sec.gov. Comments must be submitted to 

OMB within 30 days of this notice. 

Dated: January 20, 2016. 

Brent J. Fields, 

Secretary. 

[FR Doc. 2016–01394 Filed 1–25–16; 8:45 am] 

BILLING CODE 8011–01–P 

SECURITIES AND EXCHANGE 

COMMISSION 

[Release No. 34–76937; File No. SR– 

NYSEArca–2016–09] 

Self-Regulatory Organizations; NYSE 

Arca, Inc.; Notice of Filing and 

Immediate Effectiveness of Proposed 

Rule Change Amending the Fees for 

NYSE Arca BBO and NYSE Arca 

Trades 

January 20, 2016. 

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

Securities Exchange Act of 1934 

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

notice is hereby given that, on January 

11, 2016, NYSE Arca, Inc. (‘‘Exchange’’ 

or ‘‘NYSE Arca’’) filed with the 

Securities and Exchange Commission 

(‘‘Commission’’ or ‘‘SEC’’) the proposed 

rule change as described in Items I, II, 

and III below, which Items have been 

prepared by the self-regulatory 

organization. The Commission is 

publishing this notice to solicit 

comments on the proposed rule change 

from interested persons. 

I. Self-Regulatory Organization’s 

Statement of the Terms of Substance of 

the Proposed Rule Change 

The Exchange proposes to amend the 

fees for NYSE Arca BBO and NYSE Arca 

Trades to: (1) Establish a multiple data 

feed fee; (2) discontinue fees relating to 

managed non-display; (3) modify the 

application of the access fee; and (4) 

reduce the Enterprise Fee. 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 Arca BBO and NYSE Arca 

Trades market data products,4 as set 

forth on the NYSE Arca Equities 

Proprietary Market Data Fee Schedule 

(‘‘Fee Schedule’’). The Exchange 

proposes to make the following fee 

changes effective January 4 [sic],5 2016: 

• Establish a multiple data feed fee; 

• Discontinue fees relating to 

managed non-display; 

• Modify the application of the access 

fee; and 

• Reduce the Enterprise Fee. 

Multiple Data Feed Fee 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 

Arca BBO or NYSE Arca Trades in more 

than two locations would be charged 

$200 per additional location per product 

per month. No new reporting would be 

required.7

Managed Non-Display Fees 

Non-Display Use of NYSE Arca 

market data means accessing, 

processing, or consuming NYSE Arca 

market data delivered via direct and/or 

Redistributor 8 data feeds for a purpose 

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4354 Federal Register / Vol. 81, No. 16 / Tuesday, January 26, 2016 / Notices 

recipient uses, irrespective of the means of 

transmission or access. 

9See e.g. 2014 Non-Display Filing, supra note 4. 

10To be approved for Managed Non-Display 

Services, a Redistributor must manage and control 

the access to NYSE Arca BBO and NYSE Arca 

Trades 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 Arca BBO and NYSE Arca 

Trades in the Redistributor’s own messaging 

formats (rather than using raw NYSE Arca message 

formats) by reformatting and/or altering NYSE Arca 

BBO and NYSE Arca Trades prior to retransmission 

without affecting the integrity of NYSE Arca BBO 

and NYSE Arca Trades and without rendering 

NYSE Arca BBO and NYSE Arca Trades inaccurate, 

unfair, uninformative, fictitious, misleading or 

discriminatory. 

11A single Managed Non-Display Access Fee 

applies for clients receiving both NYSE Arca BBO 

and NYSE Arca Trades. The Exchange is also 

proposing in this filing to modify this application 

of the access fees. See ‘‘Modification of the 

application of the access fee,’’ below. 

12See Fee Schedule. 

13 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 ArcaBook 

and NYSE Arca Integrated Feed. See SR– 

NYSEArca–2016–01 and SR–NYSEArca–2016–03. 

14See Securities Exchange Act Release No. 62188 

(May 27, 2010), 75 FR 31484 (June 3, 2010) (SR– 

NYSEArca–2010–23). 

15See 2013 NYSE Arca BBO and Trades Filing, 

supra note 4. 

16Professional users currently are subject to a per 

display device count. See 2015 NYSE Arca BBO 

and Trades Filing, supra note 4. 

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

18 15 U.S.C. 78f(b)(4), (5). 

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 nondisplay 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 Arca BBO 

and NYSE Arca Trades and does not 

allow for further internal distribution or 

external redistribution of NYSE Arca 

BBO and NYSE Arca Trades by the data 

recipients. A Redistributor approved for 

Managed Non-Display Services is 

required to report to NYSE Arca on a 

monthly basis the data recipients that 

are receiving NYSE Arca market data 

through the Redistributor’s managed 

non-display service and the real-time 

NYSE Arca 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 Arca BBO from an 

approved Redistributor of Managed 

Non-Display Services are charged a 

Managed Non-Display Services Fee of 

$200 per month, and data recipients that 

receive NYSE Arca Trades from an 

approved Redistributor of Managed 

Non-Display Services are charged a 

Managed Non-Display Services Fee of 

$800 per month. Data recipients that 

receive NYSE Arca BBO and NYSE Arca 

Trades from an approved Redistributor 

of Managed Non-Display Services are 

also charged an Access Fee of $375 per 

month.11

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 Arca 

BBO and NYSE Arca Trades on a 

managed non-display basis would be 

subject to the same access fee of $750 

per month, and the same non-display 

services fees,12 as other non-display 

data recipients.13

Modification of the Application of the 

Access Fee 

The Exchange proposes to modify the 

application of the access fees for NYSE 

Arca BBO and NYSE Arca Trades. 

Each NYSE Arca BBO data feed 

recipient currently pays a monthly $750 

access fee for NYSE Arca BBO, and each 

NYSE Arca Trades data feed recipient 

currently pays a monthly $750 access 

fee for NYSE Arca Trades. A single 

access fee applies for data recipients 

receiving both NYSE Arca BBO and 

NYSE Arca Trades.14 The Exchange 

proposes to amend the access fees so 

that recipients of NYSE Arca BBO and 

NYSE Arca Trades would be required to 

pay a separate access fees [sic] for NYSE 

Arca BBO ($750 per month) and NYSE 

Arca Trades ($750 per month). This 

change would have no impact on 

customers who receive only NYSE Arca 

BBO or only NYSE Arca Trades. 

Reduction to Enterprise Fee 

The Exchange currently charges an 

enterprise fee of $175,000 per month for 

an unlimited number of professional 

and non-professional users for each of 

NYSE Arca BBO and NYSE Arca Trades. 

A single Enterprise Fee applies for 

clients receiving both NYSE Arca BBO 

and NYSE Arca Trades.15 The Exchange 

proposes to lower the enterprise fee to 

$170,000 per month. 

As an example, under the current fee 

structure for per user fees, if a firm had 

40,000 professional users who each 

received NYSE Arca Trades at $4 per 

month and NYSE Arca BBO at $4 per 

month, then the firm would pay 

$320,000 per month in professional user 

fees. However, under the current pricing 

structure, the fees would be capped at 

$175,000 and effective January, the fees 

would be capped at $170,000. 

Under the proposed enterprise fee, the 

firm would pay a flat fee of $170,000 for 

an unlimited number of professional 

and non-professional users for both 

products. As is the case currently, a data 

recipient that pays the enterprise fee 

would not have to report the number of 

such users on a monthly basis.16

However, every six months, a data 

recipient must provide the Exchange 

with a count of the total number of 

natural person users of each product, 

including both professional and nonprofessional users. 

2. Statutory Basis 

The Exchange believes that the 

proposed rule change is consistent with 

the provisions of section 6 of the Act,17

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

6(b)(5) of the Act,18 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 Arca BBO 

and NYSE Arca Trades. 

Multiple Data Feed Fee 

The Exchange believes that it is 

reasonable to require data recipients to 

pay a modest additional fee for 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 

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Federal Register / Vol. 81, No. 16 / Tuesday, January 26, 2016 / Notices 4355 

19See Securities Exchange Act Release No. 70010 

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

CTA/CQ–2013–04). 

20See ‘‘Direct Access Fee,’’ Options Price 

Reporting Authority Fee Schedule Fee Schedule 

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

fee_schedule.pdf. 

21See note 4, supra. 

22See, 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). 

23See NASDAQ Rule 7047 (Nasdaq Basic) and 

BATS Rule 11.22 (BATS TOP and Last Sale). 

24See FINRA Regulatory Notice 15–46, ‘‘Best 

Execution,’’ November 2015. 

in 2013 by the Consolidated Tape 

Association (‘‘CTA’’).19 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.20

Managed Non-Display Fees 

The Exchange believes that it is 

reasonable to discontinue Managed 

Non-Display Fees. As the Exchange 

noted in the 2013 Non-Display Filing, 

the Exchange determined at that time 

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. Since 

then, the Exchange also modified its 

approach to display and non-display 

fees with changes to the fees as reflected 

in the 2014 Non-Display Filing.21

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 Fee 

The Exchange believes that it is 

reasonable to make the changes 

proposed to the application of access 

fees for NYSE Arca BBO and NYSE Arca 

Trades. The Exchange believes the 

proposed changes will make the 

application of the access fees to each of 

the products so that an access fee 

entitles a customer to receive, for the 

applicable product, a data feed or feeds. 

Specifically, data recipients that take 

the NYSE Arca BBO and/or NYSE Arca 

Trades products 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 these products, or any 

specific combination of them) uses each 

product in a different way and therefore 

obtains different value from each. 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. 

Reduction to Enterprise Fee 

The proposed enterprise fees for 

NYSE Arca BBO and NYSE Arca Trades 

are reasonable because they could result 

in a fee reduction for data recipients 

with a large number of professional and 

nonprofessional users, as described in 

the example above. If a data recipient 

has a smaller number of professional 

users of NYSE Arca BBO and/or NYSE 

Arca Trades, then it may continue to use 

the per user fee structure. By reducing 

prices for data recipients with a large 

number of professional and nonprofessional users, the Exchange 

believes that more data recipients may 

choose to offer NYSE Arca BBO and 

NYSE Arca Trades, thereby expanding 

the distribution of this market data for 

the benefit of investors. The Exchange 

also believes that offering an enterprise 

fee expands the range of options for 

offering NYSE Arca BBO and NYSE 

Arca Trades and allows data recipients 

greater choice in selecting the most 

appropriate level of data and fees for the 

professional and non-professional users 

they are servicing. 

The Exchange notes that NYSE Arca 

BBO and NYSE Arca Trades are entirely 

optional. The Exchange is not required 

to make NYSE Arca BBO and NYSE 

Arca Trades available or to offer any 

specific pricing alternatives to any 

customers, nor is any firm required to 

purchase NYSE Arca BBO and NYSE 

Arca Trades. Firms that do purchase 

NYSE Arca BBO and NYSE Arca Trades 

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 NYSE Arca BBO and NYSE 

Arca Trades or any other similar 

products are attractively priced or not.22

Firms that do not wish to purchase 

NYSE Arca BBO and NYSE Arca Trades 

at the new prices have a variety of 

alternative market data products from 

which to choose,23 or if NYSE Arca BBO 

and NYSE Arca Trades do not provide 

sufficient value to firms as offered based 

on the uses those firms have or planned 

to make of them, such firms may simply 

choose to conduct their business 

operations in ways that do not use 

NYSE Arca BBO and NYSE Arca Trades 

or use them at different levels or in 

different configurations. The Exchange 

notes that broker-dealers are not 

required to purchase proprietary market 

data to comply with their best execution 

obligations.24

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. 

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25NetCoalition, 615 F.3d at 535. 

26The 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. 

27Press 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.’’). 

28Concept 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. 

29Mary 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. 

national market system for trading 

equity securities.’ ’’ 25

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 

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.26

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.’’ 27

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.’’ 28 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.29

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 

Arca BBO or NYSE Arca Trades unless 

their customers request it, and 

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Federal Register / Vol. 81, No. 16 / Tuesday, January 26, 2016 / Notices 4357 

30See 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). 

31See 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.’’). 

32This 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. 

customers will not elect to pay the 

proposed fees unless NYSE Arca BBO 

and NYSE Arca Trades 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. 

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 Arca and 

NYSE Arca’s affiliates New York Stock 

Exchange LLC (‘‘NYSE’’) and NYSE 

MKT LLC (‘‘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.30 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.31

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.32 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. 

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4358 Federal Register / Vol. 81, No. 16 / Tuesday, January 26, 2016 / Notices 

33See supra note 23. 

34 15 U.S.C. 78s(b)(3)(A). 

35 17 CFR 240.19b–4(f)(2). 

36 15 U.S.C. 78s(b)(2)(B). 37 17 CFR 200.30–3(a)(12). 

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, NYSE MKT, 

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. 

With respect to NYSE Arca BBO and 

NYSE Arca Trades, competitors offer 

close substitute products.33 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 Arca BBO and 

NYSE Arca Trades, 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) 34 of the Act and 

subparagraph (f)(2) of Rule 19b–4 35

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) 36 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– 

NYSEArca–2016–09 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–NYSEArca–2016–09. 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 will also 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–NYSEArca–2016–09 

and should be submitted on or before 

February 16, 2016. 

For the Commission, by the Division of 

Trading and Markets, pursuant to delegated 

authority.37

Brent J. Fields, 

Secretary. 

[FR Doc. 2016–01393 Filed 1–25–16; 8:45 am] 

BILLING CODE 8011–01–P 

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